Investments That May Offset Inflation

Do you remember what year it was when a gallon of gas cost $0.63? Not everyone will, since many of us had yet been born, but the answer is 1978!

Inflation is a natural part of our economic system, which is one reason the costs of goods and services increase over time. While inflation rates vary from year to year and decade to decade, price changes create challenges for everyday people like you and me.

As we lose the ability to stretch our dollars, savings rates often fall, especially for those of us living on fixed monthly incomes. While this exact scenario is playing out across our country, some investments can help hedge against inflation and rising costs. These investments include: TIPS, precious metal funds, commodity mutual funds, equities, and real estate.

TIPS, also known as Treasury Inflation-Protected Securities, can help protect against inflation. These government-issued securities tie overall investment returns to the Consumer Price Index, which is beneficial during periods of high inflation because they can help offset losses in the deposited value.

Precious metals funds are another tool investors can use during periods of rising prices, as gold tends to appreciate when the dollar's purchasing power declines. While gold is the primary focus of these funds, other precious metals, including silver and palladium, are also available through mutual funds and ETFs.

Another investment that can see its value rise during periods of inflation is commodity funds, which track the prices of staples such as corn, wheat, and energy, since their underlying inputs often cost more as prices go up.

In addition to commodities, investing in companies in inflation-sensitive sectors, such as industrials and materials, is another way to potentially protect against rising costs since these companies see their revenues and profits rise as costs increase.

Lastly, real estate is our final example of an asset that can benefit from rising prices since its revenues and underlying values often increase as inflation occurs. While buying a rental or commercial property is cost-intensive, REITs are mutual funds and ETFs that offer access to real estate ownership through securitized shares that ordinary investors can purchase.

While it is never certain to consumers when inflation may spike, there are strategies we can take with our investable assets to offset rising costs when they arrive. The aforementioned assets, among others, can provide diversified methods of protection from eroding purchasing power due to inflation. But none are guarantees since all investing involves risk, and what worked in the past may not work in the future.

If rising costs are eating away at your retirement portfolio or lifestyle, please feel free to reach out to us since we are here to help. At Lundeen Abrams Advisors, we work with a variety of clients with unique financial situations, and we would be delighted to discuss a personalized plan tailored to your individual investment objectives and situation.

We look forward to hearing from you soon!