Financial instability has been wreaking havoc on the global economy lately, making people wonder where to put their money during an inflation surge.
You’ve surely noticed various goods, including groceries, gas, and plane tickets, are more expensive than last year. Well, that’s because of the latest inflation surge. This is devastating for most consumers, who don’t have any clear answer regarding its duration and how they should react financially. Indeed, many prefer to limit splurge spending to keep their wallets safe from big hits, but there are also those who invest in various asset classes to hedge against inflation. Now you may wonder if such things are possible. Of course they are!
Some investments, such as gold and real estate, outperform the market during inflationary periods, so we advise you to take the investing route if you want to survive the harsh times.
Cryptocurrencies have also gotten into the public eye recently, generating substantial ROIs and even helping some individuals become millionaires. Bitcoin and Ethereum are just a few examples in this sense, but various other digital assets are there waiting for you, including NFTs. Nonetheless, if you take this route, be sure to research the market thoroughly and analyze the prices carefully on a platform like Binance. The ETH coin price, for example, may not be the same tomorrow as it is today – that’s why you need to find the right time to invest.
Here’s a round-up of places you can stash your money during inflation:
Even in uncertain times, real estate has been a lucrative investment option. According to a common belief, the higher the inflation, the higher the property value. However, this is not necessarily true, at least not for certain kinds of real estate. The post-pandemic era has undeniably influenced how real estate responds to inflation, which should be a leading factor to consider when investing in this asset class. As more and more companies are transitioning to remote work or hybrid models, commercial real estate is not really what you should direct your attention towards right now. Instead, residential real estate has been making waves in recent years, becoming one of the most preferred investment options. Numerous inflation-averse investors have turned to this specific type of asset to hedge their holdings.
Retail property, for instance, brings considerable ROI to those stashing their money in this area. According to Statista, home values in the U.S. have increased by about 4% – more than enough for investors to guard their holdings. However, when investing in this particular kind of real estate, it’s wise to consider the costs for financing the purchase and maintenance, as these could interfere with your gains.
That’s why more and more individuals choose to invest in real estate through Real Estate Investment Trusts (REITs). These companies possess and operate revenue-producing real estate, paying out dividends to their investors.
Treasury Inflation-Protected Securities, or TIPS, are a sort of U.S. Treasury bond designed to help investors safeguard their assets from rising prices. In this sense, their par value is adjusted annually based on the inflation rate. This can increase your interest payments, making for a viable way to preserve the buying power of your money. Nevertheless, the iShares TIPS Bond ETF has shown average annual returns of just about 3% in the last decade, so you should pay particular attention to the prospects of this asset class and deflation – when deflation arises, interest rates decrease – before embarking on this journey. Generally, TIPS are a safe investment option, as they’re backed by the U.S. government, and also a feasible way to diversify your holdings portfolio.
Unlike TIPS, stocks are quite a risky investment option, but the potential gains exceed expectations. If you go for this asset class, you should preferably invest for the long term to reap the benefits. Also, investing in a diversified portfolio of stocks is a wise move to assure holding safety and hedge inflation proficiently. Individual stocks can be extremely risky and research-intensive, so we recommend opting for an S&P 500 ETF (exchange-traded fund) or S&P 500 index fund, as they keep costs considerably low and track the index’s return for you to have a clearer picture of what happens in your account. Moreover, the money used to buy your index fund is repurposed to invest in all the firms involved with that particular index.
Don’t also forget that the key to investing during economic instability is to search for options where people can offset the rising costs. Utility stocks, for instance, are excellent for generating passive income as they usually pay dividends to their shareholders.
Cryptocurrency has gained a lot of ground over the past couple of years, and for a good reason. From Bitcoin, the first-ever cryptocurrency to enter the market, and Ethereum, an excellent platform for app development, to weirder and wackier coins like Dogecoin, Shiba Inu, and Big Eyes Coin, individuals adventuring into the crypto market have lots of options to diversify their portfolios. Most digital currencies have a limited supply, like silver and gold, which makes them lucrative investment opportunities. However, since cryptocurrency is still a new investment option compared to stocks and bonds, investors are advised to take their research very seriously before putting their money into this asset class. Overall, virtual currencies make for great investments, especially if you know how to handle volatility – for this, there are numerous strategies.
Moving from digital gold to real gold, this asset class has never ceased to be valuable. That’s because it’s a tangible asset tending to hold its value for the long term. It has been used as a means of exchange for centuries, and it seems those times are coming back. Numerous people consider gold an “alternative currency”, especially in countries where the official currency is losing value. Nevertheless, gold is not the wisest choice compared to other asset classes on this list. When inflation occurs, central banks usually upsurge interest rates as part of monetary policy, so investing in such an asset will pay you no yields.
As you can see, you can rely on many options during inflationary periods. You only need to conduct serious research to determine which one best suits your needs.