An inflation hedge is an investment intended to protect the investor against— hedge—a decrease in the

purchasing power Purchasing power refers to the amount of products and services available for purchase with a certain currency unit. For example, if you took one unit of cash to a store in the 1950s, you could buy more products than you could now, showing that th ...

of money—

inflation In economics, inflation is an increase in the average price of goods and services in terms of money. This increase is measured using a price index, typically a consumer price index (CPI). When the general price level rises, each unit of curre ...

. There is no investment known to be a successful hedge in all inflationary environments, just as there is no asset class guaranteed to increase in value in non-inflationary times. Conventional strategies for protecting wealth from inflation normally involve diversification into traditional assets like common stocks, gold, fixed-income securities, and real estate, but new strategies have value-generating assets like solar

photovoltaics Photovoltaics (PV) is the conversion of light into electricity using semiconducting materials that exhibit the photovoltaic effect, a phenomenon studied in physics, photochemistry, and electrochemistry. The photovoltaic effect is commerciall ...

Overview

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; it has chemical symbol Au (from Latin ) and atomic number 79. In its pure form, it is a brightness, bright, slightly orange-yellow, dense, soft, malleable, and ductile metal. Chemically, gold is a transition metal ...

and real estate have a reputation as good inflation hedges, though growth in stocks also can offset inflation in the long run.

Money market fund A money market fund (also called a money market mutual fund) is an open-end mutual fund that invests in short-term debt securities such as US Treasury bills and commercial paper. Money market funds are managed with the goal of maintaining a hig ...

s, 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; Currency symbol, sign: ₿) is the first Decentralized application, decentralized cryptocurrency. Based on a free-market ideology, bitcoin was invented in 2008 when an unknown entity published a white paper under ...

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.

Silver Silver is a chemical element; it has Symbol (chemistry), symbol Ag () and atomic number 47. A soft, whitish-gray, lustrous transition metal, it exhibits the highest electrical conductivity, thermal conductivity, and reflectivity of any metal. ...

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

Platinum Platinum is a chemical element; it has Symbol (chemistry), symbol Pt and atomic number 78. It is a density, dense, malleable, ductility, ductile, highly unreactive, precious metal, precious, silverish-white transition metal. Its name origina ...

, 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

Overview

See also

References