Consumers continue to feel the effects of inflation on their budgets. In February, the Consumer Price Index, which tracks the cost of consumer goods and services, showed a 2.4% rise over the previous 12 months.
And according to one global policy organization, the U.S. war with Iran and its effects on energy prices, plus the ongoing impact of U.S. tariffs, may bump prices significantly higher for the rest of the year. In a March report, the Organization for Economic Cooperation and Development forecast all-items inflation of 4.2% for 2026.
It’s a marked uptick from the group’s previous projection of 2.8%, and well above Federal Reserve officials’ latest estimate of 2.7%. The OECD, a collaborative forum of 37 governments, is viewed by the U.S. government as a reliable source of policy analysis and economic data.
For investors, periods of high inflation are generally considered a problem. While your portfolio grows over time, inflation is stealthily growing alongside it, eating away at the value of your savings.
“The main thing we remind clients is that inflation quietly erodes purchasing power,” says Joon Um, a certified financial planner with financial firm Secure Tax & Accounting. When it comes to a few percentage points in the CPI, he says, “even small differences matter.”
How inflation affects your portfolio
Short-term projections for inflation may have a material impact on your spending and could even temporarily roil markets — but it’s important to not let them dictate your long-term portfolio strategy, says Doug Boneparth, a CFP and founder of Bone Fide Wealth.
“Short-term inflation noise is just that. It’s noise. The bigger mistake investors make is reacting to it,” he says. “Selling out of equities because of a CPI print or making a dramatic shift in your portfolio based on one month’s data — that’s usually how people hurt themselves investing in the market.”
OECD predicts the inflation surge will be short-lived. The agency expects U.S. inflation to recede to 1.6% in 2027, less than the Fed’s estimate of 2.2% and below the central bank’s long-term target rate of 2%.
But experts say it’s important to remember that inflation is here to stay during the course of your career as an investor. Setting yourself up to overcome its deleterious effects on your money should be one of your top priorities, says Boneparth.
“Inflation is a slow leak, and that’s where people underestimate the damage that it causes,” he says. “You don’t feel it day-to-day, but over 20 or 30 years, it can decimate purchasing power.”
Consider the classic “rule of 72” — a money formula that has existed at least since the late 1400s. Investors have often used it as a quick way to estimate growth in their portfolio. Just divide 72 by the annual rate of return you expect to earn on your portfolio, and you get the number of years it will take for your investments to double. If you expect an 8% return, your portfolio should double in value every 9 years, for example.
Given that equation, you may look at your portfolio now and think about the fortune you’ll amass by the time you retire. But remember — the formula works in reverse, too. Divide 72 by the rate of inflation you expect over the long term, and you’ll find the amount of time it takes for your purchasing power to be cut in half. At the current 2.4% rate, it will happen every 30 years. At 4.2%, it’s more like every 17 years.
It’s key, then, to think about your savings in terms of what they actually might be able to buy you down the road, says Jim Shagawat, a CFP with advisory firm AdvicePeriod.
“A car that costs $40,000 today would cost about $80,000 in 24 years at 3% inflation, but it would reach that same $80,000 in just 18 years at 4%,” he says. “Small differences in inflation compound into big differences in lifestyle.”
Stay ahead of rising prices
To stay ahead of the curve, it’s essential to consistently invest in a diversified, core stock portfolio over the long term and to avoid leaving too much money in low-yielding cash accounts, Boneparth says.
“There are obviously instances where inflation just kind of crushes everything, but the opportunity to beat it, that’s found in equities,” he says. “That’s found in getting a return on your investment greater than what risk-free assets are going to provide you.”
If you’re particularly uncomfortable with inflation, he says, it may be worth chatting with a financial advisor about adding assets seen as “hedges” against rising prices. For bond investors, these may include Treasury inflation-protected securities, bonds whose value rises with the CPI.
Some inflation-conscious investors may prefer gold, real estate or even bitcoin, Boneparth says. No matter your preference, if adding a small inflation sleeve to your overall portfolio helps you stay invested and sleep soundly, “there’s nothing wrong with that,” he says.
“Addressing psychological behaviors in long-term portfolios is a key to being consistent,” he says.
When thinking about your long-term goals, it’s important to keep in mind that the sort of things you’ll want to — and need to — pay for in the future may come with a drastically different price tag, says Um.
“We’re also seeing clients underestimate how inflation impacts spending in retirement — especially health care and everyday costs,” he says. “At the end of the day, inflation isn’t just a number; it directly affects lifestyle, so portfolios need to be built with that in mind.”
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