Written by - What is Inflation? Inflation refers to the rise in the general price level of goods and services over time, which reduces the purchasing power of money. Over the long term, inflation can erode the real value of your investments.
- Inflation-Hedging Investments: To protect against inflation, consider investments that historically perform well during inflationary periods. These include commodities like gold, silver, and oil, as well as real estate and Treasury Inflation-Protected Securities (TIPS).
- Investing in Stocks with Pricing Power: Companies that can pass on increased costs to consumers without hurting their demand for goods and services tend to perform well in inflationary environments. Look for companies with strong pricing power and low input cost sensitivity.
- Real Assets and Commodities: Real estate and commodities often act as natural hedges against inflation. Real estate values tend to rise with inflation, while commodities like oil, metals, and agricultural products see higher demand during inflationary times.
- Diversifying Across Inflation-Protected Assets: Build a portfolio that includes a mix of inflation-protected securities, stocks with pricing power, commodities, and international investments in countries with lower inflation rates.
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