The Top 5 Investments to Hedge Against Inflation

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Hedge Against Inflation

The pandemic is over but the devastation it has caused to the economy is unmeasurable. For most Americans, increased prices have become the norm. You hear about hedge against inflation in the newspaper and witness it at the grocery store. Have you noticed the price surge in the plane ticket you purchased for your vacation this year, how your car’s tank fills up at a higher price than last year, or even how you are paying higher for the same groceries than last year?

There is only one reason for all these hiked prices, Inflation. Companies are trying to provide short-term relief to their customers and Charter Spectrum with phone deals for existing customers are a perfect example of that. But, as a buyer or a consumer, you need more financial stability in life!

Investing money could be your safety net.

1: Gold – Hedge Against Inflation

Gold is one of the oldest hedges against inflation, gold has always been a safe option for investors when interest rates fall or inflation rises. However, some considerations must be take into account before choosing gold as an investment. Think about the additional costs associated with keeping, protecting, and insuring physical gold which can hurt returns. A wiser decision could be investing through an ETF which allows you to own physical gold on your own or stocks of gold miners. Both are good options but their revenues may differ significantly.

2: Stocks – Hedge Against Inflation

Stocks are decent long-term investments against inflation. But keep in mind, not all stocks are a good investment. A great way to hedge against inflation is to invest in company stocks that have control over their prices or an even better option could be investing in a diversified portfolio of stocks. Go for S&P 500 index fund or S&P 500 ETF, which records the index’s return and keeps costs very low. Instead of choosing individual stocks which might turn out to be extremely risky, select a portfolio of stocks that can significantly lower the risk factor. It is an excellent investment for inflation as it is a low-cost diversification of hundreds of stocks that is less risky and provides considerable relief in portfolio management. You can also beat inflation by growing applications.

3: Property

Investing in property is an excellent but uncommon way to secure yourself from inflation. If you buy a house on a mortgage, keeping market conditions in mind, it can be a great investment for inflation. A huge chunk of payment is paid at the beginning of the deal with monthly fixed payments that continue for years. Of course, taxes and other expenses are expect to rise during this period but monthly mortgage payments would remain the same even if prices go up. By investing in houses on a mortgage, you lock the price of the house at a certain time and no matter if the prices hike, you still pay the same installments for your property.

4: TIPS TO Hedge Against Inflation

Also known as Treasury Inflation-Protected Securities, TIPS are specially created to defend your investments from inflation. As they are supported by the US federal government, they are one of the most secure investments to make. The US Treasury regulates the par value of these securities every year to cope with inflation. When inflation rises, the interest rate goes up, when deflation occurs, the interest rate falls. TIPS moves by the CPI and helps protect against unanticipated hikes in inflation. It pays a fixed-rate interest twice a year.

This protection against inflation makes TIPS an attractive opportunity to retain the value of your cash but it doesn’t offer any growth. At maturity, investors receive either the adjusted principal or the original principal (whichever is higher).

5: I-Bonds

I-Bonds are securities issued by the government to cope with inflation. I-Bonds retain money’s value by offering interest alterations regularly. Although they don’t adjust the bond’s par value like TIPS, they regulate interest rates after six-month intervals based on the current inflation. The interest rates of I-Bonds keep changing continuously and can also fall to zero.

You may not lose your capital investment, but there is a chance for it to lose its value over time due to increased prices if interest rates go down and the only thing that will stay for long is Spectrum TV Packages and Prices. Also, I-Bonds are not a very tangible investment as they come with strict date deadlines. Once you buy it, you can’t sell it for almost a year. Additionally, if you plan to sell it over the next four years, you’ll have to pay 3-months’ worth of interest as a consequence.

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