Inflation fears are always lingering. Here we’ll look at what inflation is, why it occurs, how it’s measured, and the best assets to hedge against it with their corresponding ETFs.

// TIMESTAMPS:

00:00 – Intro
00:14 – What Is Inflation?
01:43 – How Is Inflation Measured?
02:26 – Why Does Inflation Occur?
03:24 – Annual Inflation Rate Formulas – How To Calculate
03:48 – Why Is Inflation Good?
04:16 – Why Is Inflation Bad?
04:54 – How To Control Inflation with Monetary Policy
06:12 – Inflation Examples
07:27 – Inflation Hedges – Do You Even Need Them?
10:16 – How To Hedge Against Inflation – Assets and ETFs
11:47 – Real Estate
12:16 – Commodities
12:55 – Gold
13:42 – Stocks
14:31 – Debt
14:55 – Short-Term Bonds
16:18 – TIPS and I-Bonds
18:32 – Conclusion
19:39 – Outro

// SUMMARY:

Inflation refers to an aggregate increase in prices, commonly measured by the Consumer Price Index (CPI), which decreases purchasing power. This means that for any given unit of currency, in this case the U.S. Dollar, you’re able to buy fewer goods and services as time goes on.

A country’s monetary policy helps maintain “healthy” levels of inflation. In the U.S., that responsibility falls largely to the Federal Reserve Bank or simply “the Fed.” The Fed attempts to keep inflation within reasonable limits in order to maximize employment, stabilize prices, and encourage spending. The main levers they can pull to achieve this are influencing interest rates and the money supply.

Inflation is always happening, hopefully at a steady rate, kept on the rails by a central bank. This expected inflation is already incorporated into asset prices. What we’re concerned with possibly protecting against is unexpected above-average inflation.

Even then, an investor with a long time horizon and a high tolerance for risk – and subsequently, a high allocation to stocks – likely shouldn’t be worried about short-term inflation. However, it’s perfectly suitable and even desirable for retirees, risk-averse investors, and those with a short time horizon to have some allocation to inflation-protected assets like TIPS.

Commodities and gold may not be great assets to save your portfolio from runaway inflation in the future, and are almost certainly suboptimal investments over the long term. Investors will likely come out ahead using assets like REITs, short-term nominal bonds, and TIPS. I’m not a fan of sector bets, but it may also be prudent to slightly overweight “defensive” sectors like Consumer Staples and Utilities if one fears inflation.

Assets and ETFs mentioned:
Real Estate – VNQ
Commodities – PDBC
Gold – SGOL
Stocks – VT
Debt
Short-Term Bonds – VGSH, SGOV
TIPS – VTIP, SCHP, LTPZ
I-Bonds

Read the blog post here:

#investing #inflation #stockmarket #stocks #etfs #inflationhedges

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Disclaimer: While I love diving into investing-related data and playing around with backtests, I am not a certified expert. I am not a financial advisor, portfolio manager, or accountant. The information presented is not financial advice, investing advice, or tax advice; it is for entertainment purposes only. Investment products discussed are for illustrative purposes only. It is not a recommendation to buy, sell, or transact in any of the products mentioned. I try my best to provide accurate information, but I can’t guarantee 100% accuracy. Do your own due diligence. Past performance does not guarantee future returns. Investing in the stock market – especially with leverage – is risky. Read my lengthier disclaimer here:

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HOW TO: Hedge Against Inflation

REVEALED: Best Investment During Inflation

HOW TO INVEST IN GOLD: Gold IRA Investing

HOW TO INVEST IN SILVER: Silver IRA Investing

As the cost of living continues to rise, finding ways to protect your wealth from the effects of inflation becomes increasingly important. Luckily, there are several assets and ETFs that can serve as inflation hedges, providing a safeguard against the erosive effects of higher prices. Here are seven of the best inflation hedge assets and ETFs to consider:

1. Gold: Gold is widely regarded as the ultimate inflation hedge, as its value tends to rise as inflation accelerates. Investors can buy physical gold or invest in gold-related securities, such as ETFs that track the price of gold.

2. Real Estate: Real estate is another popular inflation hedge, as property values often appreciate over time and rents can be adjusted to keep pace with rising prices. Investors can own physical properties or invest in real estate funds or real estate investment trusts (REITs).

3. Infrastructure: Investments in infrastructure, such as toll roads and airports, can provide reliable income streams that are often linked to inflation. Infrastructure ETFs are a convenient way to gain exposure to this sector.

4. Commodities: Hard assets like commodities, such as oil, natural gas, and agricultural products, often perform well during inflationary periods. Investors can buy commodities directly or invest in ETFs that track the price movements of these assets.

5. TIPS: Treasury Inflation-Protected Securities (TIPS) are a type of government bond that adjusts its principal value based on changes in the consumer price index. As inflation rises, so does the value of TIPS, making them a popular choice for investors looking to protect against inflation.

6. Dividend-Paying Stocks: Stocks that pay dividends can be an effective inflation hedge, as the dividend payments can increase along with inflation. Investors can also look for companies that have a history of raising their dividends over time.

7. International Stocks: International stocks can offer an additional layer of diversification, particularly if they are denominated in a different currency. Investing in countries with lower inflation rates can also provide some protection against domestic inflation.

In summary, there are several assets and ETFs that can serve as inflation hedges, providing a safeguard against the erosive effects of higher prices. These include gold, real estate, infrastructure, commodities, TIPS, dividend-paying stocks, and international stocks. By including these assets in your portfolio, you can help protect your wealth from the impact of inflation.