Three stages of inflation

Every inflation eventually leads to a deflation. There are three stages of inflation.

The initial stage of inflation overlaps with the previous deflation.
People are unsure about their investments and some think that deflation will continue. Value investors perform best in the initial stage of inflation. People who take cheap loans also win. Credit starts to flow to sectors where fundamentals are the best. Every inflationary cycle is different.

In the intermediate stage of inflation, credit continues to flow to sectors where credit is already flowing. The reason is that it is easiest to pay off the debt with a profit if more debt is taken after you have taken debt and more people buy the same assets that you bought. Momentum traders perform best in the intermediate stage of inflation. Technical analysts are mostly momentum traders. When people talk about inflation proofing their portfolio, they usually refer to only the intermediate stage where they see constantly rising prices. That is a mistake because inflation has a full cycle with profit opportunities in each stage.

In the terminal stage of inflation, every talks about investing. People who missed the boom of last few years want to jump in. There are new acronyms. Very soon inflation will be over and deflation will follow. There will be tightness of money.
Cash will soon be king. Risk averse people who hold cash and government bonds win. When deflation takes hold, some bold and prudent short sellers have a party time.

Unfortunately, it is hard to know which stage of the inflation cycle we are in exactly. But we only need to be approximate and more right than wrong to make money in the longer run.