Throughout history, equities have proven to be a fairly reliable place to invest throughout times of high inflation. This is because stocks tend to outproduce inflation. Some companies and their subsequent stocks will do better than others to ward off the impact of inflation. For the year 2022, you’ll find a lot of dividend growth, small-cap, financial, and even energy companies showing up on a lot of recommended lists among analysts. Another sector getting the green light is any industries that are experiencing rebounds from the impact of the pandemic. This is true of the travel, hospitality, and even leisure sectors. The key is finding value in a volatile market.
Real estate is a good place to be when you are looking to combat inflation with your investments. This is particularly true for residential real estate. Both building materials and home construction are recommended to combat inflation. You’ll find that REITs or “Real Estate Investment Trusts” make for a good opportunity for those to invest in the real estate industry without having to buy the property themselves.
Commodities are one of the best ways to hedge against inflation. Agricultural and raw materials can be effectively traded like securities in the market. Those who trade commodities buy and sell various things like oil, natural gas, grain, and even coffee. Someone looking to invest in commodities can allocate some of their portfolios using futures contracts and by investing in exchange-traded funds.
Treasury Inflation-Protected Securities (TIPS)
This is another good option for those looking to protect against inflation. These are bonds backed by the United States government. Their value increases as the CPI number increases. Thus, it eliminates the risk of inflation outpacing the value of the bonds.
The price of these bonds increased drastically when the outlook of inflation was peaking in 2021. Because of this, they aren’t necessarily as tempting as they were one year prior.
A lot of those looking to protect against inflation usually consider savings bonds. These are bonds that the United States Treasury sells directly to investors. They are usually considered to be very safe investments because their overall value cannot decrease. This means that they are a stable investment when in periods of uncertainty which inflation brings.
A lot of investors look towards precious metals like gold to hedge against inflation. This is especially true if the paper currency is decreasing in value. Gold is a tangible asset and it usually holds its value very well in periods of political instability and periods of high inflation. While it’s not the perfect investment, it can be a good way to diversify your portfolio to protect against losing too much from inflation.
Although the property market is at a high at the moment, property investment is still a good investment, take a look at online estate agents for the ideal property. For example a buy to let property will provide an income while people are opting out of purchasing properties and even if the prices do go down, as predicted, they will come back up if you hold onto your property for long enough.
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