Investing in Hard Assets to Hedge Against Inflation

Consumer prices have increased over 9% in the past year. With these soaring prices, many are likely wondering how they can best invest to get the highest return, or at least protect against the soaring prices.

There is a myriad of things that can be done to protect your money, including putting your money into high-yielding savings accounts, bonds, and the stock market.

In addition to these investments, it’s also important to invest in hard assets. There are four hard assets that you should consider investing in, in addition to your stock investments.

1. Real Estate

Real estate is one of the best ways to help hedge against inflation. This is in part due to the idea that the mortgage on your home stays at a fixed rate. If you were to rent the same home, however, the rent is usually higher than what your mortgage on the same property would have been. This is in order to help keep pace with inflation.

If you take this same idea and apply it to rental properties, the effect is the same. The mortgage you owe on the property is less than what your renters are paying you. As a consequence, if you own your own home, you save money by paying less for your mortgage, whereas if you have rental properties, you are able to charge more for your rent and make money.

However, in certain markets, if interest rates are raised too much, investing in a rental property with a high interest rate does not offset your mortgage. It’s important to be aware of the market whenever investing in rental properties. Always make sure that the rental price is higher than your monthly payment.

In addition to your own personal rental properties, there are other real estate investment options called REITs (Real Estate Investment Trusts). This is where you put your money into a trust. It is invested, along with the money of others, into real estate. This is a good option for individuals who don’t want the added stress of their own rental properties, nor want to invest as heavily in their own rental property.

Oftentimes, these investments yield higher returns than what you would otherwise get in the volatile stock market.

2. Gold and Silver

Gold and silver are good investments as they tend to be more stable than cash. The price of precious metals will rise with inflation. A unique characteristic of precious metals is that there is a limit to what’s available, whereas more cash can always be printed. This makes precious metals a more sure investment than cash because cash will decrease in value as inflation rises, whereas precious metals will increase.

3. Jewelry

Jewelry is a unique hard asset to invest in during these volatile times in our economy. Jewelry has the benefit of possessing precious metals and jewels – you can arrange them into a beautifully designed ornament, making them more practical in the ability to enjoy them. Some may argue against jewelry as an investment, but there are some proven timeless jewelry pieces that can gain value over time.

Among some of the value-retaining items that you should look to invest in (apart from Tiffany rings, Cartier necklaces, and Rolex watches) are more classical and traditional pieces of jewelry. These pieces include the diamond tennis bracelet, diamond studs, and hoop earrings.

Something to consider when investing in jewelry is the age of the piece. Vintage jewelry is one of the top indicators that a piece will hold its value. Other things to consider are the authenticity of the piece and whether there is certification on the piece of jewelry.

Another aspect of investing in wealth-retaining jewelry such as lab grown diamonds is the quality of the piece, the stone itself, and its clarity and color.

4. Collectibles

Another interesting asset you may consider when finding ways to protect your wealth/money is collectible items. These might include art pieces, Chinese pottery, Chanel purses, coins, fine wines, stamps, or even historically significant pieces. These types of investments are more one-of-a-kind pieces that can not be replicated, and as the value of money decreases, these items tend to keep pace with subsequent inflation, if not increase in value.

Final Thoughts

As we face a time of runaway inflation, it is important to take control of your finances. Proper investments can help you to hedge against inflation in these turbulent times, and hard assets are one of the best ways to do this. It’s time to evaluate your finances and determine what investments would be most practical and benefit you the best.