Inflation is the continual increase in the price of goods and services. This is usually what happens in a healthy economy. The problem is that with inflation being consistent, assets that don’t grow with over time lose a large chunk of their value. For example, $100 today would be worth only $97 after a year at the traditional inflation rate of three percent. But your assets won’t be staying around for a year but multiple years. In a decade, your $100 would be closer to $50.
If you want to retain the full value of your hard-earned money, then you need to invest in assets that can stand the corroding influence of inflation. Here are some suggested choices.
There is nothing like gold when it comes to retaining value. This precious metal retains value even at the toughest of economic times. The allure of gold is that it is a tangible and real asset. You can easily use it as a currency when necessary. Several gold refinery companies can offer you gold bullion and even directly deliver it to you. But you have to be aware that gold is not as profitable as other assets. Its primary purpose is to retain value while other assets combat inflation by increasing their value.
Another real-world asset that is a favorite among investors is real estate. This is because as inflation increases, the value of land also rises. It allows you to keep pace with rising prices. When you sell your property in the future, you will be sure to get it for far more than you spent on it today. But you don’t have to wait for the sale. You can develop the land on your own and then rent it out. As the land’s value increases, you can also raise your rents. This can allow you to earn money even with skyrocketing prices.
TIPS is the acronym for Treasury Inflation-Protected Securities. These are government-secured securities. The main idea behind them is that they are like typical securities that have a maturity year and then a fixed rate for that year. The main difference is that the price adapts to the inflation rate. This ensures that whatever money you put into TIPS will not be eaten away by inflation.
Stocks and shares are a great way to fight inflation. This is thanks to their consistent growth rate that often beats the rate of inflation. It might not look good during some periods when hyperinflation reigned, though. All you need to do is to hold on to the existing stocks. They often bounce back and reach interest rates that can beat the current inflation rate. Have diverse stocks and invest in various businesses so that you can have a contingency in case that some of your investments don’t pan out.
Inflation is a natural part of the market. People should always be aware of how it affects them and prepare accordingly. The assets above are pretty solid when it comes to retaining value, but they are not fool-proof. Constantly monitor them and be prepared to sell them off when necessary to extract their full value.