Secrets of Using Treasuries to Beat Inflation: In this excerpt from a Finstream TV program, Michael Finke discusses how Inflation Protected Treasuries are a better hedge for inflation than equities are.
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Inflation is a term that strikes fear in the hearts of many investors and consumers alike. When prices rise, the purchasing power of your money diminishes, leading to a decrease in the overall value of your assets. While inflation is a natural part of a healthy economy, it can still wreak havoc on your savings if left unchecked.

One popular strategy for combating inflation is investing in Treasury securities – also known as Treasuries. These are debt securities issued by the United States government, considered to be one of the safest investments in the world. Treasuries come in different maturities, from short-term Treasury bills to long-term Treasury bonds, and are backed by the full faith and credit of the US government.

So how can Treasuries help you beat inflation? Here are some secrets to using Treasuries effectively in your investment strategy:

1. Inflation-Protected Securities (TIPS): One of the most effective tools for hedging against inflation is investing in Treasury Inflation-Protected Securities (TIPS). These bonds are specifically designed to protect investors from rising inflation by adjusting their principal value according to changes in the Consumer Price Index (CPI). This means that if inflation rises, the value of your TIPS will increase, maintaining the purchasing power of your money.

2. Diversification: Just like any other investment, it is important to diversify your Treasury holdings to mitigate risk. By spreading your investments across different Treasury securities with varying maturities, you can ensure a more balanced portfolio that can withstand changes in inflation and interest rates.

3. Reinvesting Interest: Another secret to beating inflation with Treasuries is to reinvest the interest payments you receive from your bonds. By reinvesting your earnings, you can compound your returns over time and potentially outpace inflation. This can help you maintain the purchasing power of your investments and grow your wealth over the long term.

4. Pay Attention to Interest Rates: While Treasuries are considered low-risk investments, their returns are directly influenced by changes in interest rates. When interest rates rise, bond prices fall, and vice versa. By keeping an eye on interest rate movements, you can strategically time your Treasury purchases and sales to maximize your returns and protect your investments from inflation.

In conclusion, Treasuries can be a valuable tool in your arsenal for beating inflation and preserving the value of your investments. By investing in TIPS, diversifying your holdings, reinvesting interest payments, and paying attention to interest rates, you can effectively use Treasuries to weather the storm of inflation and secure your financial future. Remember to consult with a financial advisor to tailor your investment strategy to your individual goals and risk tolerance.