Sirwin
Sirwin

Inflation Hedges: Take Your Pick


“Inflation destroys savings, impedes planning, and discourages investment. That means less productivity and a lower standard of living.” -Kevin Brady

Something that we can observe at all times in any economy is the inflation rate. Some maintain healthy levels, some experience a pattern of waves, others have fallen into hyperinflationary periods, while others sometimes take the opposite turn into deflation. Either way, all economies inflate and deflate and work to keep the happy medium because going either way of the spectrum can lead to varying consequences. 

Inflation, Buying Power and Value

Many factors affect the rates of inflation. Supply and demand, circulating money supply, interest rates, taxes, wages, etc. Inflation is basically when the value of a currency decreases, or the price of goods increases, based on these factors. 

Inflation Inflation Quotes

We must ask the question, though: When inflation occurs and the value of a currency goes down, how can we protect our money and maintain its buying power? When things get more expensive, it might cross your mind to put them dollars into something that’ll hold its own over time- in terms  of valuation. But where?

Options:

The short answer is: it’s not in a savings account. Any savings account with your money in it is losing value if your APY is significantly less than  the rate of inflation, which it probably is. Inflation is currently above 6% in the USA and most banks usually offer an APY of ~.01%.

“Money in the bank”, perhaps, isn’t the most celebratory phrase to use in times of inflation.

So what are the other roads to take? What can I trust to keep a steady or increasing value? Here’s a short list:

(Precious) Metals

One of the go tos for investors everywhere. Historically, one of the best investments you can make. Shiny things, utility and longevity- metals have won over our hearts for many reasons since the beginning of human history. From gold and silver to copper and lead, we’ve put value to all metals for different reasons: iron for strength and adversity, gold for shine and scarcity. Sure, values fluctuate, some metals more so than others, but metal has something fiat currency doesn’t: universal acceptance. You can go anywhere or to anyone and trade metals, especially if they’re precious. Across the world, throughout the course of time, (precious) metals have held some sort of value standard.

Land (Real Estate)

Another popular option for investors. If inflation comes in hot, the value of a property or piece of land will rise as well. Rent it out, sell it, use it for business reasons, mine, ranch, farm, etc, etc. You can always turn a profit if you steward and operate your parcel reasonably. Land comes with a bunch of opportunities for personal use, yes, but a ton of opportunity for financial growth as well. Historically, one of the best hedges, but also one of the most detrimental to the unsuccessful land buyers. 

Inflation Hedge Making Assets Bigger

Self-Sustainable Resources

When daily life costs more, it only makes sense that you’d want to save a little bit of money right? DIY is something that consumer-driven culture has taken from society in many cases. But it’s also starting to make a comeback in the era of pandemics and rising inflation. At the cost of doing a little more, folks are hoping to pay a little less. Energy, food and labor: 3 big areas where I see people turning to their own skills and resources to save a few bucks. 

Energy in the form of purchasing solar panels and windmills with long-term, high storage, very efficient batteries. As well as purchasing new fenestration products (windows,doors, roofing, insulation) and high efficiency appliances/electronics and light bulbs to make their energy go further. Food in the form of gardens and livestock. Labor in the form of tools and equipment. Being self-sustained at any level, in any sort of economic strife, is priceless in my opinion.

Cryptocurrency and Blockchain

Perhaps the most controversial option, but most certainly the newest and the highest gaining. As we’ve written on the subject before: investors have tossed the other aforementioned ideas out the door in light of the rising popularity and acceptance of Bitcoin and other blockchain based technology and currencies. Seeing annual changes in triple-digit + percentages in the green direction, as well as the utility as payment and ease of trading, it only makes sense to those seeking to make the gains. 

Expanding further than just Bitcoin and altcoins like Ethereum or Polkadot, blockchain offers NFTs– digital certificates verified by the blockchain. Most popular in digital art, these NFTs are now a store of value like any other well-renowned painting like the Mona Lisa. Blockchain itself is the source of value behind any of these digital assets. High yields, high security, and can be used just as easily as the dollar itself… who wouldn’t put their money into crypto?

Stocks and ETFs

Stocks are always an option, though not exactly favored in times of economic turmoil- unless you’ve got your money in the right places. Like any other investment, do your research! Will these economic struggles affect this stock and which way? Will it go up or down? Are there dividends? How much can I yield by being in this ETF? There are tons of options and opportunities in the stock market. It just takes getting to know where the money is going to and how they play out in ever-changing markets.

DYOR

It is always vital that you do your own research when it comes to any situation, especially with your finances and investments. This post is NFA (not financial advice). However, we hope this serves as informational and helpful insight.

Inflation Burning Money Inflation Burns

Inflation comes and goes. Current rates are definitely something to keep in the back of your head. When it does come, there are varieties of ways to protect your money, but you know what works best for your situation! Metals may not be as viable to you as crypto, or vice versa!  Whatever your situation, make wise investments, protect your money and always do your research! 

    Written by SMH from ofthefreemarket.com on December 1, 2021

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OfTheFreeMarket
OfTheFreeMarket

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ofthefreemarket.com

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