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Best Inflation Hedge Investments

By Edited May 22, 2014 2 7

The best inflation hedge investments can be categorized into three: stocks and bonds, real estate, and commodities. There are associated benefits and underlying risks to these investments though. These are discussed later in this article.

Investments are important in trade and business. Investing is primarily done for the purpose of gaining a profit in return. During the economic recession of recent years, the value of investments had been more evident. There is a need to invest in order to survive economic depression. In times like this, investments which are able to hedge inflation are the best options.


Inflation is best described by a negative upward arrow. This trend is not beneficial to the economy in general. Here, prices of goods and services increase yet the buying power of the consuming public does not. Both producer and consumer are at loss since consumption is reduced and production will eventually be lessened. During inflation, interest rates and currency value depreciate. In this case, everyone from stock owners or share holders, investors and capitalists, brokers and the like are all in the losing ground.

Due to this, everyone will want to spend time and money only in inflation hedge investments. As mentioned earlier, these are anything which can survive the threats of inflation.

You may have come across various articles all over the Internet which focus on one item alone as the most effective inflation hedge. Some claim real estate properties such as lands and buildings to be the best, others boast of stocks or bonds, still a few mentions commodities, and there are those who believe in the power of precious metals.

Stocks and Bonds

There are those who say that non-physical assets such as stocks and bonds are the best inflation hedge investments. Although stock values may be dependent on many factors such as the overall performance of the market itself, the demand for the specific product, and the growth of the company which represents it; there are stocks which are not easily swayed by such factors.

The best stocks for inflation are those from huge corporations with multiple divisions. If one fails, other smaller companies attached to it will be able to cover up the losses. A multibillion dollar sales profit is also a consideration for stocks to buy. The company which manufactures it is able to withstand inflation when the product itself performs well based on sales reports. Aside from choosing a specific company, you may also pick among brands which are able to maintain a profitable level in the niche or market it is attached with. An example will be drugs and pharmaceuticals.

Foreign bonds provide the same power over local inflation. When a domestic currency (U.S. dollar) declines in value, an alternative currency from overseas can help. Government bonds, stocks, and shares are also unaffected by drastic changes. If anything occurs, it will be minimal. This is because most government related investments are not consumer based.

Real Estate Properties

In finding out whether or not real estate assets are the most important inflation protection, its positive and negative sides should be laid down.

As the w

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orld’s population grows, so is the need for residential, commercial, and industrial lots as well as buildings. This is why real estate properties protect your investments from inflation. While interest rates and monetary currency value depreciates, these assets remain as high valued as they already are or may even increase in time. The value of real estate property such as lands and physical structures (houses, buildings, etc.) do not diminish over time but even improves. This may be due to a constant demand for them since there are no alternative options which can immediately take their place.

When monetary currency depreciates in value during inflation, real estate prices particularly commercially used properties remain constant or may even increase in prices. Buying a property in the form of a real estate provide the security needed when inflation strikes.

Despite its long term benefits, an immediate conversion from hard asset to actual money when there is a need for cash may become a challenge. It is not easy to dispose of expensive property when financial crisis is at hand.

Agricultural and Industrial Commodities 

Commodities can be either agricultural or industrial products. Some agricultural items include rice, wheat, and other household supplies. Industrial items on the other hand include aluminum, coal, and crude oil to name just a few.

Commodities display more stability than most other forms of trade. These are constantly in demand due to various purposes they are used with. Agricultural commodities will always be in demand for residential purposes in the same manner as industrial commodities are for their use in commercial items and products.

Although commodity prices may increase and decrease based on retail affecting factors, the continuous demand for these on residential and commercial levels are enough to have them listed among investments to protect against inflation.

Low Risk Investment in Precious Metals

Gold and other precious metals are inflation hedge investments as well. In recent years, stock markets show minimal or no downward movement in precious metals such as gold and silver. Their effectiveness in hedging against inflation can be attributed to a consistent demand for these in various industries despite a scarcity in supply.

These investments have been tried and tested over time to be very effective to hedge inflation. Their effectiveness had been applied by countless others but the outcome may still be different for each individual investor.



Mar 11, 2012 11:34am
Good read! Interesting and informative information on 'Best Inflation Hedge Investments,' plus, a good description of each. Congratulations on being featured. Tweeted, +1, and liked!
Mar 11, 2012 12:09pm
Thank you. I appreciate it. :)
Mar 14, 2012 2:21pm
Good article. Could be a good idea to lock in a 30-yr now at under 4 percent before rates are raised in late-2014 (as the Fed has said). Gold/silver and most commodities will perform well going forward IMO. As you can prob. guess by my name, I like gold the most going forward. I feel that while real estate and stocks could rise is price, gold/silver/commodities will rise the most in VALUE. Get out of the dollar while you still can!
Mar 14, 2012 11:39pm
I believe so too. Some of the other articles I've written in relation to this series are focused on the potential of gold. Thanks for reading and sharing your thoughts.
Apr 30, 2013 2:27pm
I can't wait to do more investing. Right now I have a couple mutual funds and some other stuff. Thanks for the great advice.
Apr 30, 2013 6:26pm
No problem. You're welcome.
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