Luis Pazos 
Worried about inflation or even hyperinflation? You’re not alone. Prices for goods and services are climbing, and the dollar isn’t what it used to be. Protecting your wealth and making a profit might seem tough in these times. Last year, the Consumer Price Index (CPI) shot up by 9.1%, the biggest jump since 1981, and consumer confidence has hit a new low. Between a shaky stock market and rising costs, it’s easy to feel anxious about investments. But there are still smart moves you can make to fend off inflation and even come out ahead.
What Is Inflation?
Inflation is when the general prices of goods and services go up over time, usually measured annually. It can happen due to wars, natural disasters, oil price hikes, or central banks printing too much money. As a consumer, you might feel it most at the grocery store. If you’re invested in something like bonds, rising inflation can hurt the value of your investments because your money buys less than it used to.
What Causes Inflation?
The main culprit behind inflation is an increase in the money supply. More money chasing the same amount of goods and services leads to higher prices. Other causes include wars, natural disasters, rising oil prices, excessive government spending, and poor economic conditions.
How Can Inflation Affect My Financial Strategy?
Inflation can seriously impact your financial game plan, especially if you’re retired or nearing retirement. Your savings could shrink in value as prices rise. Also, if you have debt, inflation can make it harder to pay back because the money you owe becomes worth more in real terms.
What to Invest in During High Inflation?
Wondering where to put your money? Here are nine investment options that can help during periods of high inflation:
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Gold and Silver
These precious metals have been a safe haven for centuries. They tend to maintain their value or increase it during inflation. You can invest through ETFs like the SPDR Gold Trust (GLD) or iShares Silver Trust (SLV) or buy physical metals. -
Real Estate
Property values and rents generally rise with inflation. You can invest in residential, commercial, or industrial properties, or consider REITs (Real Estate Investment Trusts) if you prefer a more hands-off approach. -
Value Stocks (Dividends)
These stocks trade below their intrinsic value and often belong to stable, dividend-paying companies. They tend to perform well during inflationary periods. Think of Dividend Aristocrats like Johnson & Johnson and Procter & Gamble. -
REIT Funds (ETFs or Mutual Funds)
REITs are companies that manage income-producing real estate. They offer diversification and regular dividend payouts, making them a solid choice for income-seeking investors. -
Stock Index Funds
These funds track market indexes like the S&P 500 and offer diversification at a lower cost than actively managed funds. They can be bought as mutual funds or ETFs from providers like Vanguard and Fidelity. -
Floating-Rate Loans
These loans have variable interest rates that adjust with market changes. While the rates are usually higher than fixed-rate loans, they are less affected by inflation. Consider ETFs like the Invesco Senior Loan ETF (BKLN). -
Inflation-Linked Bonds (Series I Bonds)
These bonds adjust with inflation, offering protection for your investments. Series I Bonds can be bought directly from the US Treasury and currently offer attractive rates. -
Cryptocurrency
Digital currencies like Bitcoin and Ethereum are newer to the investment scene. While they’re volatile, some investors see them as a potential hedge against inflation. Do your research and invest only what you can afford to lose. -
Yourself
Investing in your education, skills, and health can pay off big time. Whether it’s gaining a new certification, networking, or improving your well-being, investing in yourself is always a smart move.
The Bottom Line
There are plenty of ways to safeguard your money from inflation, whether it’s through commodities, bonds, or real estate. Choose investments based on your goals and risk tolerance, and remember that all investments come with some level of risk. Invest wisely and only with what you’re willing to lose.
