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How to Choose and Implement the Best Inflation Hedge Strategy?

Updated on March 16, 2011

The Many Ways to Beat Inflation

This page is all about how to choose the right investment vehicle that can protect and even grow your wealth.

The good news is, there are many ways to hedge against rising inflation. The bad news is, it takes effort to figure out the right strategy that is most suited to your unique needs. This is not a one size fits all type of thing, which is why we have this page.

Read on to find the way that's just the right fit for you.

List of Inflation Hedging Strategies

Here's the list of investment options that can help you beat inflation:

  • Treasury Inflation Protected Securities (TIPS) ?
  • Gold or other Precious Metals like Silver ?
  • Commodities Futures ?
  • FOREX currency pairs ?
  • Real Assets e.g. Real Estate Property ?
  • Start Your Own Internet Business ?
  • Take on more Good Debt ?

Inflation Protected Bond & Securities

Why not buy into investment products that are specifically designed to protect against inflation?

You can invest in Treasury Inflation Protected Securities (TIPS) through direct ownership or through a mutual fund or ETF type of investment vehicle. The decision of whether to go buy TIPS directly from the government or own them indirectly as part of a fund boils down to a few considerations.

These are basically still bonds that have a maturity date e.g. 5 years, so if you want to smooth out your bond incomes then you'll need to plan on buying more than one and with different maturity dates. When buying in the form of funds these details are handled for you, but with a management fee that you need to take note in your calculations.

There's also some tax implications e.g. for US citizens the twice year paper gains (if any) from TIPS is taxable at the Federal government level. Make sure you do your own research based on your unique situation and needs before you commit any investment.

Want to Go with the Gold Standard?

Gold and other precious metals like Silver have always been heralded as the best inflation hedge. Gold is also one of the most sought after investment in time of uncertainty like war or economic hardships. Can it really be the safe haven investment that can beat rising inflation?

Its alway prudent to take a cautious approach when investing your hard earned money. As an investor, you should first be clear what's your maximum holding period and how much volatility can you endure in your investments.

How else Can You Beat Rising Inflation?

If you have surplus disposable income then why not consider investing in Real Estate properties to benefit from inflation. The advantage is that real assets usaully rise in line with a country's inflation rate. Subsequent future mortgage payments also shrinks when you its real value after discounting for depreciation of local currency  values that accompanies general rise in prices. 

One of my favorite way to beat surging prices is to create a new income stream. In my case by starting a niche website or some other form of home internet business. Its easier than you thing, although persistence and hard work is still required in buckets full. From my own experience, most of my internet income streams have increased together and in some cases exceeded the rate of inflation.

I hope this page have been useful to you. Remember to take the time to plan your future so that you will enjoy it. 

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