Inflation can be a scary thing. It's hard to know what will happen in the future, and inflation is often unpredictable. Imagine if your purchasing power were diminished by 50% in one year.
1. Gold and Other Tangible Assets
One of the most popular inflation-proof asset classes to invest is in tangible assets like gold and silver. These metals cannot be printed by a government, they don't rot over time, and they retain their value much more easily than other investments which can quickly lose their worth with inflation.
Another inflation hedge investment as inflation rises is in commodities. Commodities are essentially raw materials that have future value, so they will often rise when inflation occurs because the cost of production increases while simultaneously decreasing their supply.
3. 60/40 Stock/Bond Portfolio
60/40 is a well-known investment mix that includes 60% stocks and 40% bonds. It reduces inflation risk by including both inflation hedging assets like precious metals, commodities etc. as well as treasury bonds which are often inflation protected themselves.
4. Real Estate Investment Trusts (REITs)
Real Estate investment Trusts are a type of security that holds investments in real estate property. They can be publicly traded on stock exchanges and will often pay dividends as well as offer inflation protected rental income from tenants who have to continue paying rent even if inflation occurs because it's the cost of doing business for them.
An inflation-proof way to invest in stocks is through an S&P 500 ETF. The S&P 500 index consists of the biggest, most liquid companies on the American stock exchange and this type of fund will track their performance so you can expect inflation protection as long as they exist.
6. Real Estate Income Through Renting Out A Home
Investing in a home to rent it out is inflation protected because inflation will cause the cost of new construction and materials used by contractors to rise. We’ve definitely seen this before with property values.