The 6 Safest Ways To Invest During Inflation

As a result of the widespread spread of the coronavirus, inflation has been playing havoc on the American economy. From June 2021 to June 2022, the official government CPI rose by 9.1 percent. This was the biggest annual growth rate in the US since the recession of 1981–1982.

After Russia invaded Ukraine, the cost of energy became a major concern. Peak energy costs were 42% higher than they had been a year earlier. Since the Iranian Revolution in 1980 drastically curtailed oil production, this is the largest increase in oil prices.

Even though 2016 was a challenging year economically, we are currently seeing the worst inflationary era in over forty years. Consumers have less disposable income than they have in decades, and the situation shows no signs of improving anytime soon. It’s understandable that higher costs would make people feel pessimistic, yet the inflationary climate we’re in is far from hopeless.

There are actions you may take to hedge against inflation and potentially increase your wealth over time.

In a time of rising prices, what are the safest ways to put your money to work

Inflation occurs naturally within the economic system. A 9.1 percent increase is significantly more than the ordinary yearly inflation rate of about 2 percent. After a year, the inflation rate might be negative in some instances. However, such occurrences are unusual, and you should budget for annual inflation of at least 2%.

It is best to retain some of your money in long-term investments as part of a diversified portfolio so that you can maintain your current standard of living even if inflation rises.

Investing in a retirement account, for instance, is a traditional strategy for building wealth over time and keeping pace with inflation.

However, you won’t be able to tap into these funds until much later in life. You’ll have to look elsewhere if you want to hedge against inflation in the near term.

The 6 Safest Ways To Invest During Inflation

If you’re looking for ways to save money in these times of rising prices, consider the six options below. All of these choices are secure investments in general, but they may be more so during periods of high inflation.

1. Property


It’s recommended that real estate be your first investment choice because of its high potential for positive returns. When market conditions are favorable, commercial real estate is the best place to put your money. Recent years, however, have been everything from “normal.”

Because of the uncertainty surrounding the future of the traditional office building, more and more companies are experimenting with work-from-home and hybrid work schedules. However, if you’re looking for a hot market, residential real estate may be the way to go.

The average annual increase in property value since 1991 has been around 4%. That sum considerably exceeds the typical annual inflation rate. The fact that rents have been rising steadily is a plus, too. You can afford a new place to live by renting out your current one and collecting a sizeable monthly rent payment.

Owning numerous properties carries with it a certain amount of inherent risk. It’s possible that you won’t turn a profit for a long time due to the expense of financing the acquisition and regular upkeep. On top of that, the housing market collapse of 2007-2008 was only the most recent example of the dangers that exist.

Fortunately, you may avoid taking any of these dangers on by yourself. Publicly traded real estate investment trusts (REITs) hold real estate and mortgages as investments.

You can have exposure to the real estate market and all its potential rewards without actually purchasing any property if you put your money into one of these investments. When people combine their resources, they are able to make larger transactions at considerably reduced individual risk.

2. Bonds for the Investing of Savings

The U.S. Treasury offers savings bonds with two interest rate options: a fixed rate and an inflation-indexed rate. Inflation is tracked and used to adjust the interest rate every six months.

In this vein, the current I-Bond interest rate is 9.62% and is guaranteed until October 2022. Changes to the interest rate in the fall will depend on the health of the economy.

I-Bonds are advantageous since they can be invested in for either the short or long term. Interest on an I-Bond is only paid annually for 30 years, although the bond can be redeemed at any time after the first year.

Any withdrawals made before the five-year mark will incur a three-month interest penalty. However, after five years of I-Bond purchase, you may withdraw your money tax-free.

3. The Stock Market

Commonplace U.S. investments include stocks. You may make a billion dollars or lose it all if you make poor financial decisions. Although investing in stocks carries the highest level of risk, the possible rewards make it worthwhile to consult a broker or investment trading organization.

It’s important to seek for ways in which consumers can balance the higher expenses during periods of high inflation. Utility stocks, for instance, frequently distribute dividends to their investors, which you can use to generate passive income.

The gains are less vulnerable to fluctuations in the market. Cost increases usually result in higher prices for consumers, thus businesses can count on making a profit in nearly all cases.

Investing in a stock index fund is another sound financial plan. These investments can be found in the form of mutual funds or exchange-traded funds (EFTs), and they track an index such as the S&P 500 or Nasdaq 100. You may rest assured that your money will be spread among all of the firms included in the index you choose when you buy an index fund.

As a result of your fund’s diversification, you may be able to lessen the impact of inflation on your savings. In addition, the entry barrier will be smaller than if you were to acquire stocks in each firm separately.

4. Gold and silver

Gold And Silver

Precious metals like silver and gold have been used as money for hundreds of years. Prior to President Nixon’s official abandonment of the gold standard on August 15, 1971, the U.S. dollar was backed by gold. Numerous people have continued to put their money into precious metals like silver and gold in the decades thereafter.

In periods of inflation, the value of paper money declines, making silver and gold more attractive investments. The price of commodities rises when the value of the dollar falls (more on that later).

In times of inflation, silver has outperformed gold historically. Gold, on the other hand, is almost 70 times as expensive as silver. Putting money into both could be a smart move to reduce risk.

If you want to put your money into silver and/or gold, you may either buy the metals themselves or put your money into exchange-traded funds (ETFs) that follow them. Unless you’re an expert, buying silver and gold in physical form is a dangerous move.

You should exercise caution and ensure that the item you’re purchasing is truly worth the cost. However, investing in an ETF may be a more secure option because there is no need to worry about keeping physical assets.

5. Basic Materials

As was previously established, commodity prices tend to rise rapidly during times of high inflation. A properly executed investment in this space might yield extraordinary returns. Supply and demand, however, ultimately decide the prices of goods. When investing in commodities, you run the risk of making a loss as well as a gain.

One must know when to buy and sell commodities. The prices of many commodities have risen in recent years, including oil, natural gas, corn, meat, coffee, cotton, soybeans, and copper.

Oil prices in particular jumped dramatically when the Russian invasion started in late February 2022. Some investors made a fortune betting on oil as a commodity right before prices spiked.

The market value of wood went up similarly. The epidemic caused major disruptions in the supply chain for wood and other construction supplies. Still, demand held steady. Because of this, wood prices surged, and astute traders made a killing.

Most commodities, unlike silver and gold, have a finite lifespan. It is absurd to think that you can make a profit by buying a large quantity of avocados and reselling them. Consider investing in exchange-traded funds (ETFs) that mirror niche indices for commodities. If prices rise, you won’t have to worry about being left with stale goods.

6. Cryptocurrency

Cryptocurrency is a form of digital currency that is recorded in a public distributed ledger called a blockchain. When compared to the other investment opportunities on our list, it’s rather complex and yet in its infancy.

How cryptocurrency performs in the face of inflation is still an open question. Although the potential payoff is substantial, this investing strategy carries a significant degree of danger.

Because of its restricted circulation, cryptocurrency can be a highly profitable investment. Mining cryptocurrencies is an expensive endeavor with uncertain returns. Therefore, there isn’t a flood of new cryptocurrencies hitting the market, and the existing cryptocurrency maintains its value fairly well.