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During times of high inflation, consumer goods, investments, real estate, fuel, and gold prices can increase significantly. The increase in the cost of living expenses is a symptom of inflation -the expansion of the money supply within our economy. Inflation can deplete your wealth, leading many people to look for alternative options to hedge against it.
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After A Tough Year, Odey Asset Management Finishes 2021 On A High
For much of the past decade, Crispin Odey has been waiting for inflation to rear its ugly head. The fund manager has been positioned to take advantage of rising prices in his flagship hedge fund, the Odey European Fund, and has been trying to warn his investors about the risks of inflation through his annual Read More Table of Contents
The Following Is A List Of Tried-And-True Inflationary Protective Assets:
The Following Is A List Of Tried-And-True Inflationary Protective Assets: Gold:
For generations, gold has been viewed as a primary investment option for savvy investors looking to protect their wealth from inflation. Governments, central banks, financial institutions, and investors view gold as an alternate form of currency, during times when fiat currency loses purchasing power. When inflation rapidly increases, governments turn to their gold reserves to keep their countries solvent. Central banks from around the world have purchased over 393 tons of global net gold in 2021 alone.
Gold preserves purchasing power for longer periods of time when compared to fiat currencies like the US dollar and euro. One ounce of gold in 1945 was worth $35. Today, gold is worth around $1800 , and analysts predict that gold can easily hit $3000 an ounce in 2022. One of the reasons for gold's price increase is the US dollar's loss in purchasing power over time.
As consumers start to ditch dollars, stock, property, and luxury goods during economic downturns, gold is expected to climb to record level prices. Gold becomes an attractive financial vehicle. When those assets turn to liabilities during economic hardship. It's not too late to buy gold today, but as inflation continues to increase over time, gold will become increasingly more expensive to buy. So don't wait! Silver:
Silver is another precious metal that has been used as a means to hedge against inflation for many years and has recently become even more popular. Currently valued at around $23 an ounce, it's cheaper to buy silver than gold and is often more accessible to those looking to build a portfolio . Silver closely follows gold's price fluctuations, and the“ Gold-Silver Ratio ” is often referenced when tracking these price changes.
Another factor that gives silver value during high inflationary time s is the increase in demand as both a financial vehicle and an industrial component. Silver is used for many industries including jewelry, tableware, medicine, solar technology, cars, and electronics. As economies work to recover from downturns, silver demand for industrial components spikes. This leads to a higher price, as well as opportunities for silver investors to turn a nice profit.
Many notable market analysts project that for 2022 silver's price will reach well over $30 an ounce, with some projections estimating over $100 an ounce. At the current rate of $23 an ounce, it's a perfect time to buy! Bitcoin:
Cryptocurrencies have become highly popular in the last couple of years, but one has consistently stood out from the rest: bitcoin . Bitcoin is being viewed as Gold 2.0, as many investors begin to invest in the digital currency as a new hedge to inflation. One attractor to bitcoin is its liquidity - it is easy to buy and sell quickly when necessary. As people lose faith in their country's fiat currency, many turn to bitcoin, adding to its value.
Bitcoin has many fluctuations in price which can seem risky for those people who are looking into preventing losses, but in the long term, bitcoin has been one of the best-performing assets. For 2022, Goldman Sachs predicts that bitcoin will hit $100,000 per token, making it an attractive store of wealth compared to many other options. Real Estate:
Shelter is a necessity. People are willing to pay for a place to lie their heads down even when prices skyrocket. Home and rental prices have increased significantly since the 2008 recession because of extremely high demands. Buying a property, either with cash or through financing, can help secure your wealth while getting through a global financial crisis . TIPS:
Investing in Treasury inflation-protected securities , TIPS, is popular during high inflationary periods. TIPS are special kinds of bonds that mirror the rate of inflation and are backed by the U.S. Treasury Department. TIPS principal increases with inflation and is measured using the Consumer Price Index . At maturity, you are paid the original principal or adjusted principal, whichever is higher. TIPS pays out a fixed rate interest twice a year.
Protecting your wealth against inflation is very important. You should align your investments pursuant to the amount of risk you can incur. Also, make sure that you realign your portfolio according to the goals and budget you have set.
Updated on Jan 17, 2022, 12:23 pm
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