An inflation hedge is an investment intended to protect the investor against (

hedge A hedge or hedgerow is a line of closely spaced shrubs and sometimes trees, planted and trained to form a barrier or to mark the boundary of an area, such as between neighbouring properties. Hedges that are used to separate a road from adjoi ...

) a decrease in the purchasing power of money (

inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduct ...

). There is no investment known to be a successful hedge in all inflationary environments, just as there is no

asset class In finance, an asset class is a group of financial instruments that have similar financial characteristics and behave similarly in the marketplace. We can often break these instruments into those having to do with real assets and those having ...

guaranteed to increase in value in non-inflationary times. Inflation can impact investment decisions by making it difficult to predict future prices. This makes it risky to invest in certain assets, such as commodities, that may be impacted by inflation. Inflation can erode the value of investments over time. This is why it is important for investors to consider inflation when making investment decisions. ''Barron's Finance & Investment Handbook'' states: "Traditionally,

gold Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile ...

and

real estate Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more genera ...

have a reputation as good inflation hedges, though growth in stocks also can offset inflation in the long run. Money market funds, which pay higher yields as interest rates rise during inflation times, can also be a good inflation hedge." Certain cryptocurrencies like

Bitcoin Bitcoin (abbreviation: BTC; sign: ₿) is a decentralized digital currency that can be transferred on the peer-to-peer bitcoin network. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distr ...

are sometimes considered a modern " digital gold" and an alternative hedge against inflation to the more traditional gold, yet performed very poorly during the

2021–2022 inflation surge The 2021–2022 inflation surge is the higher-than-average economic inflation throughout much of the world that began in early 2021. It has been attributed to the 2021 global supply chain crisis caused by the COVID-19 pandemic, and unexpecte ...

Silver Silver is a chemical element with the symbol Ag (from the Latin ', derived from the Proto-Indo-European ''h₂erǵ'': "shiny" or "white") and atomic number 47. A soft, white, lustrous transition metal, it exhibits the highest electrical ...

is also considered by some to be a hedge against inflation.

Platinum Platinum is a chemical element with the symbol Pt and atomic number 78. It is a dense, malleable, ductile, highly unreactive, precious, silverish-white transition metal. Its name originates from Spanish , a diminutive of "silver". Pla ...

, once considered to be a more speculative metal for investors, has turned out in the 2020s to be a metal seen as a hedge against inflation similar or superior to gold, silver, or Bitcoin.

References

Asset Inflation {{invest-stub

See also

References