Inflation rates are high, creating struggles among working-class families and investors. With rates higher than they have been in the last three decades, it is natural for people to look for ways to protect their money and investments.
Thankfully, it is possible to “inflation-proof” your savings. However, you will need to focus on making smart money moves to ensure maximum protection. There are at least five ways to protect your money in the current economic climate.
1. MONEY MARKET FUNDS OR TIPS
Money market accounts are not always the best investment strategy, but during times of rising inflation, these accounts provide a level of security that other investment vehicles cannot. Such accounts are considered stable options during high inflation because they fluctuate, automatically adjusting to the changing general market and protecting investors against market loss.
Treasury Inflation-Protected Securities or TIPS also provide inflationary protections, but they are more complicated investment options. However, they might be the best option for specific investors.
2. REAL ESTATE
While many investment vehicles struggle to maintain value or make significant gains during times of inflation, real estate is different. Property values tend to rise in times of inflation, leading to the considerable appreciation of the hard asset.
You can purchase investment properties directly if you have the funds or invest in a real estate investment trust. REITs are excellent ways to dip your toes in the investment property pond while minimizing your risks.
3. COMMODITIES
It is no secret that some hard assets, such as gold and silver, tend to thrive in times of increasing inflation. Precious metals also offer some advantages in how you invest.
Gold and silver can be kept as tangible assets, like coins or bullion bars. However, you can also invest through ETFs to reduce your personal risks.
You will likely need to open a brokerage account to invest in commodities. There are several brokers to choose from, including full-service firms.
4. DEBT CONVERSION
Part of protecting your assets and finances is ensuring you maintain a balanced debt-to-income ratio. While many people favor adjustable-rate debt in times of declining or low inflation, rising inflation leads to higher interest rates.
To avoid paying more than an asset is worth, it is best to look into options for converting adjustable-rate debt to fixed-rate debt. It is best to look into these options with credit cards, mortgages, home equity lines of credit, etc.
5. EQUITY INVESTMENTS
A common strategy during times of stability is to invest in high-dividend-paying stocks. Unfortunately, this strategy is not suitable for times of inflation.
Instead, investors should look to infrastructure and growth-type stocks or funds. Several options that can benefit from inflation include:
- Healthcare
- Energy
- Technology
- Food
- Building materials
Exchange-traded funds provide the best options for diversifying your portfolio and investing in inflation-healthy options. Some ETFs to look into include Vanguard’s Healthcare Index Fund or S&P Oil & Gas Exploration & Production ETF.
The current rate of inflation is staggering, and it is a cause for concern among most American families. However, it is possible to protect your savings with some wise investment strategies and financial maneuvers.
What is your favorite investment strategy during times of inflation?