Investing In A High Inflation Environment

We’ve been hearing quite a bit lately about inflation, and frankly there seems to be a mixed bag out there in regards to if inflation is increasing, and when. I’m not here to answer either of those questions, but I am here to share ways that I am considering to maximize my investments in the case that inflation does increase.

High Yield Savings Accounts Are Worth Less In A High Inflation Environment

I want to call this out at the top, because high yield savings accounts are a popular strategy for emergency funds. As inflation rises, your savings account interest rates are not going to grow at an equal rate, this means that your savings account will be worth less over time in this type of environment.

With that said, I am still a firm believer in keeping cash on hand, and would likely stick to a HYSA even in this situation.

Hedge Inflation By Buying Real Estate

Historically, real estate has been a choice asset class during high inflation periods. The reason is actually quite simple: rising inflation, results in increased prices, which results in increased real estate resale value. Another reason that real estate is a popular choice is because you can diversify by collecting rental income.

My research suggests that during periods of higher inflation, rent prices generally increase along side the real estate value. Because real estate increases and mortgages become more difficult to acquire, you can potentially see a decline in purchases and increase in the rental competition, thus driving up rental prices.

Consider investing in Gold, precious metals, and commodities

A reason you’ll see gold, precious metals, and commodities mentioned commonly when researching for inflation resistant investing is simply because their value is based on things other than USD. Golds value is not set by a banking system, it’s instead determined based on the rarity, uses (jewelry, etc), etc. It has intrinsic value because of it’s conductivity, resulting in it commonly being used in electrics and various appliances.

 

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