You maybe have some monies in cash, protected from market risk, but every day you are likely lighting a larger number of this cash on fire to inflation. Every day that dollar buys less. You might avoid the dangers of the road, but you still lose gas by idling.

So, the media and financial world are proposing several different “inflationary hedges,” like gold, real estate, TIPs, stocks, commodities and cryptocurrencies. But what constitutes a hedge? Are these true hedges, and if so, are they in your best interests?

We’ll examine 10 investments that are perceived as “inflationary hedges,” which means identifying what constitutes a hedge, all with the goal of helping you figure out what makes sense for you and your current situation.

00:00 Introduction 
01:41 What is a hedge? 
05:23 1. Gold and Precious Metals
11:15 2. REIT’s/Real Estate
16:08 3. TIPs
18:28 4. U.S. Stocks
22:30 5. International Stocks
24:02 6. Series I-Bonds
27:51 7. Infrastructure
30:02 8. Short-term Nominal Bonds and Cash
31:35 9. Commodities
34:55 10. Currencies

Inflation is a part of our everyday world, which means it is baked into stock prices, wage agreements, virtually everything. Without getting too much into things, remember that a stock price is determined by the sum of its future cash flows discounted to the present day by a discount rate, and this discount rate considers some expected rate for inflation. What does all that mean? Simply that stock prices consider some expected rate of inflation.

Okay, what about when there is unexpected inflation? That is, when rates of inflation exceed expectations? How do stocks and various asset classes, including “inflation hedging assets” perform? This is where the disconnect happens for most investors, and even a lot of financial representatives, so I want to make sure you understand the difference.

First let’s break down what an inflationary investment “hedge” is, or at least, what many people think a hedge is:

1. It will positively correlate with both high expected and high unexpected inflation
2. It won’t have too much up and down, meaning it isn’t too volatile
3. It will be accessible without penalties or major drawbacks, so it will have liquidity, otherwise, you might not be able to get it in time of unexpected need
4. It will outpace inflation in the long run: meaning it will have a positive “real expected rate of return”

Now…let’s look at the traditional assets that are known to “inflation hedge,” describing first what they are, while also analyzing how they “hedged” given these preconceptions:

1. Gold and Precious Metals
2. REITs/Real Estate
3. TIPs
4. U.S. Stocks
5. International Stocks
6. Series I-Bonds
7. Infrastructure
8. Short-term Nominal Bonds and Cash
9. Commodities
10. Currencies

While the perfect inflation hedge might not exist, there is still the question of how one should best allocate and weight their portfolio with the varying asset classes. This is greatly dependent on a variety of factors, including where you are at and where you are looking to go.

#Inflation #InflationHedge #Investing

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These videos are limited to the dissemination of general information and are not intended to be legal or investment advice. Nothing herein should be relied upon as such. The views expressed are for informational purposes only and do not take into account any individual personal, financial, or tax considerations. There is no guarantee that any claims made will come to pass.

Disclosures: …(read more)

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