5 Things That Won’t Lose Value Because of Inflation

The rise of inflation equals the rise of stress for people of all classes. Inflation doesn’t evade you if you are part of the middle class and doesn’t affect you less if you are a member of the upper class. Therefore, securing your money and hedging from inflation benefit literally everyone who has some spare savings.

Here we have collected five things you can do so that the high inflation rate doesn’t empty your pockets.

5 Things That Won't Lose Value Because of Inflation

What Is Inflation?

To understand how to beat inflation, you need to understand what it is. Basically, it’s always been present in the economy in one way or another. Sometimes it is less noticeable, while other times, it makes front news because people can’t afford to pay the rent.

Inflation may vary from country to country. Its rate determines the value of a currency. If the rate goes down, you can buy a couple of things for, let’s say, 100$. However, when the rate goes up, your 100$ is now worth less. Consequently, you can afford to buy fewer products. More about it in a moment.

The drop in value is noticeable when compared to prices we used to have a few years back. For example, 10 years ago, you could buy products to cook breakfast, lunch, and dinner. Four years ago, the same amount of money was only enough to buy products for two meals. And today, with the exact same amount, you can only afford to purchase products for breakfast. It’s a rough example but makes a clear point of lost value.

This is when inflation shield practices come into play.

How Does Inflation Affect Your Savings and Investments?

Knowing the inflation rate will help you understand how much it will affect your savings and investments. For example, saving accounts are great, but their inflation protection may not be good enough.

Let’s say your saving account offers a 2% interest rate and will increase the amount of money you save by 2%. However, if the inflation rate is higher than your interest rate, you are potentially earning less money. It’s not profitable.

You need to find an investment or a bond that beats inflation. This way, you don’t lose anything, and may even make money, provided the deal is profitable.

5 Things Inflation Won’t Devalue

Here are the five things you can invest in that won’t lose their value. You don’t need to have the fortune to invest, but you should definitely have enough money to survive for months or years after making an investment.

Do not invest all your savings if you cannot afford to pay for the essentials in the future. It’s worth investing later in that case.

Value Because of Inflation

Gold

It may not be a surprise to you to see gold in the first place. Gold has always been viewed as one of the best stores of value throughout the good and troubled times. It holds its value even during the toughest economic times. It doesn’t erode or deteriorate.

You can either purchase golden jewelry, but you’ll need to wear it or hide it to protect it. Another more modern option is to purchase through an ETF, the Exchanged Traded Fund. Buying gold may be inconvenient but owning it through funds makes it much easier and safer.

Bond Market

One of the bonds you can invest in is TIPS, the Treasury inflation-protection securities. The purpose of TIPS bonds is to keep up with inflation while increasing in value.

If you are worried about the risks involved, TIPS is considered the safest investment because it is credited by the US federal government. Whenever inflation rises, the TIPS’ principal value goes the same way. The same happens whenever inflation diminishes.

TIPS bonds are also considered profitable, especially when inflation rises because, unlike other bonds, they adjust the payments.

Stocks in Firms

Although not risk-free, stocks are a good option to invest in. It is a long-term investment in companies that are competitive in the market. To hedge inflation, you need to find a firm in which prices rise alongside inflation. This way, the profit increases together with the stock.

It’s good to diversify your investments with gold, bonds, and stocks. This way, you don’t keep all your money in one place but raise their interests separately.

Diversify Your Investment with Foreign Stocks and Bonds

Don’t limit yourself to the local market. Foreign bonds and stocks may be more profitable than the ones you can readily access. Look for markets that are different from the US market. For example, European or Asian stocks.

Diversifying your investments also mean you get the chance to earn in a different currency that may have a stronger value.

Rental Property

Probably the priciest investment of all – rental properties. Although property investors take out a loan to finance the purchase, it takes time and determination to start making money off the property.

You would need to do proper research on the topic, but many people who choose this option aim at long-term investment. It may take the first couple of years to pay off the debt with the monthly income from the tenants. And only later would you start making a profit off of it.

Rental property is a reliable business, but again, it isn’t a fast approach to shielding from inflation.

In Conclusion

Exploring your options never hurts. Using discovered opportunities promises a bright future. Although all investments come with some level of risk, they can shield you from inflation. You can choose the option that is the most suitable for you. Most investments let you decide how much you are willing to spend. Other things that may hedge you from inflation include budgeting, paying off your debts on time, and grabbing any opportunity you think will make a profit.

Dragan Sutevski

Posted by Dragan Sutevski

Dragan Sutevski is a founder and CEO of Sutevski Consulting, creating business excellence through innovative thinking. Get more from Dragan on Twitter. Contact Dragan