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How to Hedge Against Inflation

By Edited Nov 13, 2013 0 0

Three Effective Hedges to Protect Your Money

Anyone who has ever studied history, or felt the bite of rising costs at the grocery store, understands inflation’s ability to wear away money’s value to nothing. In extreme cases, like Weimar Germany in the 1920s, the effect is so terrible that stacks of paper bills were burned for warmth since their value was worth little else. This is why it’s critical for serious investors and those who just want a solid retirement to learn how to hedge against inflation.

Fortunately, inflation’s corrosive powers are not unstoppable. There are three tested and proven ways to guard your earnings against the beast.

Silver, Gold, and Other Precious Metals

Though it’s debatable whether or not silver, gold, and other rare metals are the absolute best way to hedge against inflation, they are certainly the oldest method. They also provide the most accessible and practical protection for everyone from the richest titan to the person living on nothing but their Social Security check.

Metals like silver and gold were previously used in many nations as currency. Today, they remain internationally recognized as a backup way to barter if paper currencies should break down. Their long history means their weights and measures are well classified and understood, making them easy to acquire as coins or bars of solid bullion. Moreover, these materials continue to have industrial uses, making them stable commodities.

All of these features make precious metals attractive as an effective hedge against inflation. They offer enormous flexibility for storing different amounts of wealth as well. If you’re looking to hold value in the hundreds, then look at silver. But if it’s thousands or tens of thousands you want hedged, then buy palladium, gold, or platinum.

Real Estate

Real estate is another widely recognized means to ward off inflation. Land as well as physical properties will always rise with inflation, holding intrinsic value in the event a nation’s currency rapidly inflates. Unlike metals, though, real estate does have a few drawbacks.

Unless you’re buying great quantities of gold or platinum, a real estate investment is far more expensive than what it takes to get started buying precious metals. It demands heavy research. In addition, real estate is subject to volatile swings in the market than precious metals, but it may also have greater growth potential if you buy in a well targeted area.

Other Commodities

By now, you probably realize the best way to hedge against inflation is by buying items with intrinsic worth to society. While precious metals and real estate are the most popular ways to go, some enjoy taking different paths. Oil, minerals, grain, fruits, and other commodity markets are looked at as alternatives for investors trying to hedge against inflation.

Stranger still is another approach that seems more like saving toward consumption rather than true investing. Storable foods, razor blades, batteries, and other household items with long shelf lives are hoarded at cheaper prices to be used well after inflation drives their cost up. This fringe method is probably the most unenjoyable, unless you've got a stomach for going through a thousand can crate of tuna for many years.

Hedging against inflation concerns is a necessity. Fortunately, these three methods are fairly painless to implement, and may help you stretch your assets further in times of reduced income like retirement.



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