What assets are inflation proof?

Common anti-inflation assets include gold, commodities, various real estate investments, and TIPS. Many people have looked to gold as an "alternative currency," particularly in countries where the native currency is losing value.

investopedia.com - 9 Asset Classes for Protection Against Inflation - Investopedia

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A dollar today will not buy the same value of goods in ten years. This is due to inflation. Inflation measures the average price level of a basket of goods and services in an economy; it refers to the increases in prices over a specified period of time. As a result of inflation, a specific amount of currency will be able to buy less than before. Therefore, it is important to find the right strategies and investments to hedge against inflation. The level of inflation in an economy changes depending on current events. Rising wages and rapid increases in raw materials, such as oil, are two factors that contribute to inflation. Inflation is a natural occurrence in the market economy. There are many ways to hedge against inflation; a disciplined investor can plan for inflation by investing in asset classes that outperform the market during inflationary climates. Keeping inflation-hedged asset classes on your watch list—and then striking when you see inflation begin to take shape in a real, organic growth economy—can help your portfolio thrive when inflation hits. Key Takeaways Inflation occurs in market economies, but investors can plan for inflation by investing in asset classes that tend to outperform the market during inflationary climates. With any diversified portfolio, keeping inflation-hedged asset classes on your watch list, and then striking when you see inflation can help your portfolio thrive when inflation hits.

Common anti-inflation assets include gold, commodities, various real estate investments, and TIPS.

Many people have looked to gold as an "alternative currency," particularly in countries where the native currency is losing value. Commodities and inflation have a unique relationship, where commodities are an indicator of inflation to come; as the price of a commodity rises, so does the price of the products that the commodity is used to produce.

Here are some of the top ways to hedge against inflation:

1. Gold

Gold has often been considered a hedge against inflation. In fact, many people have looked to gold as an "alternative currency," particularly in countries where the native currency is losing value. These countries tend to utilize gold or other strong currencies when their own currency has failed. Gold is a real, physical asset, and tends to hold its value for the most part. Inflation is caused by a rise in the price of goods or services. A rise in the price of goods or services is driven by supply and demand. A rise in demand can push prices higher, while a supply reduction can also drive prices. Demand can also rise because consumers have more money to spend. However, gold is not a true perfect hedge against inflation. When inflation rises, central banks tend to increase interest rates as part of monetary policy. Holding onto an asset like gold that pays no yields is not as valuable as holding onto an asset that does, particularly when rates are higher, meaning yields are higher. There are better assets to invest in when aiming to protect yourself against inflation. But like any strong portfolio, diversification is key, and if you are considering investing in gold, the SPDR Gold Shares ETF (GLD) is a worthwhile consideration.

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