The Best Tips for Investing During Inflationary Periods

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T H E B E S T T I P S F O R I N V E S T I N G D
U R I N G I N F L A T I O N A R Y
P E R I O D S
B Y L E V E L F I N A N C I N G
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In June 2022, the inflation rate in the US
touched an astounding 9.1, a figure we havent
seen in decades. It went down slightly in the
following months, but its still well above
7. There are several reasons why this is
happening, starting with the fact that many
companies couldnt keep up with the increased
demand for goods and services after the
Coronavirus lockdown. This had an obvious impact
on prices. As if that wasnt enough, the
Russia-Ukraine conflict contributed to a global
increase in energy prices due to the
restrictions on imports of Russian oil.
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According to various financial experts, the worst
move is actually not to invest during inflation,
as just leaving your money in your bank account,
while prices are rising considerably, will
reduce your real net worth. If you have one
hundred dollars in a bank account with a very low
interest rate, high inflation means that you can
afford to buy fewer and fewer products and
services with that money. Instead, you should
invest cautiously so that it protects you from
the adverse effects of inflation while taking
advantage of the opportunities.
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Inflation hedging refers to investing in asset
classes that perform particularly well during
inflationary periods. Here are the most notable
ones. Gold - Historically, gold has been
considered the ultimate investment to protect
yourself against rising prices. Thats because
its a real asset that tends to retain its value
over time. While its performance has not been
particularly outstanding in 2022 so far, it has
still outperformed most assets since the
beginning of the year, confirming its reliability
as a shield against inflation.
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Treasury Inflation-Protected Securities, or
simply TIPS, are government bonds with an
interest rate that changes based on changes in
the inflation rate. This, and the fact that the
US governments back them, make them one of the
safest investment options during inflation. They
are issued in maturities of 5, 10 and 30 years.
Index-linked gilts issued by the British
government are also a valid alternative to
TIPS. Commodities - Buying commodities is
another clever way to protect your portfolio
from inflationary pressures.
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This is another major asset investors tend to
look at during high-inflation periods. According
to Forbes, investing in return- generating real
estate is the best move you can make against
inflation. Thats because, in this case,
inflation can help you increase your income and
not just protect your investment from
devaluation. First of all, you can buy real
estate with a fixed- rate interest rate. As your
income continues to rise due to inflation, your
monthly mortgage payment will become less and
less of a burden. Moreover, if you decide to rent
your property, you can benefit from the fact
that rental income tends to keep up with
inflation or increase at an even higher pace.
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If you want to benefit from the inflation hedging
properties of real estate investment but dont
have the necessary capital or dont want the
hassle of landlord-tenant relations, you can
invest in a Real Estate Investment Trust, or
REIT. This term describes a fund that owns and
manages a pool of return- generating real estate
assets. As an investor, you will receive a
dividend from the fund. As REITs are usually
listed, you can also decide to sell your share
in the fund if you deem it convenient.
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