Inflation, the process of money becoming less valuable over time, is a nightmare for investors. If your assets are losing value while your purchasing power goes down at the same time, you’ll find it hard to weather inflation. That’s why it’s so important to move your finances into inflation hedges ahead of monetary devaluation.
Today, we’re taking a closer look at some investments that will keep your money safe even as the dollar gets weaker.
Typically, an investment portfolio should be comprised primarily of stocks and filled out with a few bonds. If you’re looking to hedge against inflation, though, you can adopt a very defensive financial stance with a 60/40 split of stocks and bonds. This conservative approach is generally considered a safe arrangement for a portfolio in the face of devaluation.
The 60/40 split doesn’t require you to do much research, and it can safeguard your assets for a short period. Just remember to return to a standard arrangement after inflation eases off. This kind of portfolio won’t expose your money to the best growth potential in times of normal economic activity.
Rare metals are a great commodity to invest in during times of inflation. Unlike printed money, there is a set amount of gold on the planet. No government can issue more gold when times get tough. Any money you invest in gold today is likely to retain its current value, even if inflation would usually drive its value down.
Gold, silver, and platinum have histories as alternative currencies in the absence of government-backed money. Their associations with wealth and commerce make them favorites of investors who don’t trust central banks to safeguard value.
Investing in commodities like milk, beef, orange juice, and natural gas might seem unusual during times of inflation. Futures contracts on these assets can be very lucrative when money loses value, though. The price of commodities increases as inflation worsens. As such, these goods can give your portfolio an inverse relationship to monetary devaluation.
It’s worth pointing out that commodities are highly volatile. Financial planners don’t usually advise newcomers to purchase them because of this. Investors who are new to the market or don’t know much about finance are encouraged to research before investing any money in commodities. However, confident investors could find their assets surging in value even as the dollar loses its shine.