Every investor must have a basic understanding of economics. One of the concepts that you should learn is inflation, which is the increase in the prices of commodities and decline in the purchasing value of money in all its forms. Thankfully, there are types of investments that are barely affected by or protect against the negative effects of inflation. These are called inflation hedges. These are four investments that you can spend money on to protect your investment dollars:
Purchase your own house
Properties represent a natural inflation hedge. It also helps diversify your investment portfolio, improving your protection. Search for a rcsotherbysrealty.com Tri-Cities real estate to have this inflation hedge.
Buy inflation-protected securities
Treasury inflation-protected securities (TIPS) are among the safer options in this list. These securities are available in terms of five, 10 and 30 years and can be bought directly from the U.S. Treasury. Usually, the principals of these securities also increase with inflation, making it a good hedge.
Get into the stock market
Stocks are one of the most reliable inflation hedges. Many financial publications and experts agree that stocks offer the most upside potential among hedges. Ideally, the best companies to invest in are those listed in the Standard & Poor (S&P) 500 Index.
Stock up on gold
While gold only hedges against inflation 54 percent of the time, this is better than nothing. Despite this relatively low success rate, gold is still an inflation hedge that is worth trying out if you want to be protected against steep inflation.
Sure, a small rate of inflation will not exactly hurt, but anything above five percent could have devastating effects on your finances. It would be a good financial move to be prepared just in case the inflation rate goes up by doing a few of the tips above.