How To Invest During a Period of High Inflation

4 Ways To Invest During a Period of High Inflation

Inflation can eat away at the value of your savings, making it important to invest your money wisely. In this video, we'll show you how to invest during periods of high inflation.

First Thing's First

When investing during high inflation, choose assets that have a good chance of keeping up with or even outpacing inflation.

These assets should ideally have a strong track record of weathering inflationary periods in the past.

1. High-Yield, Floating-Rate Bank Loans

Interest rates on these loans are tied to a benchmark that tends to rise with inflation, providing a natural hedge.

They offer higher yields to compensate for added risk, helping to offset the effects of inflation on purchasing power.

These loans are typically senior to other debt instruments, which means they have a higher claim on assets in the event of default.

2. Precious Metals

Precious metals, such as gold, have a long history of being a safe haven asset during times of economic uncertainty and inflation.

Gold has a finite supply and cannot be easily created or destroyed, which means it can hold its value during periods of inflation.

Precious metals can provide a hedge against inflation, as the value tends to rise with inflation.

They are often seen as a store of value and a way to diversify an investment portfolio.

In times of crisis or market turbulence, precious metals can provide a source of stability and liquidity.

3. Real Estate

Real estate can be a good investment during periods of high inflation as property values and rents tend to rise with inflation.

It can provide a steady stream of passive income through rental payments.

Real estate is often seen as a tangible asset that can offer a store of value and a hedge against inflation.

It can be a hedge against currency devaluation, as real estate holdings can be denominated in different currencies.

4. Equities

Equities can be a good investment during periods of high inflation as companies can increase prices to keep up with inflation, leading to higher profits and stock prices.

Historically, equities have provided returns that outpace inflation over the long term.

They can offer a way to diversify an investment portfolio and provide exposure to different sectors of the economy.

Dividend-paying stocks can provide a steady stream of passive income, which can be especially valuable during times of inflation.

Thomas Brock, CFA®, CPA

Quick Tip

Rather than hunting for individual stocks or stock sectors that are likely to outperform during inflation, long-term investors should focus on ensuring they are adequately exposed to all aspects of the global stock market. The best way to do this is via low-cost, fund-based vehicles.