By Chris O’Shea*
Investments that can be inflation-proof
In May, consumer price inflation hit 8.5 percent, the largest yearly increase in more than forty years. It might be time to consider how you’re investing. Here are some moves to make so that your portfolio outpaces inflation.
Treasury Inflation-Protected Securities
As the name suggests, Treasury Inflation-Protected Securities (TIPS) are bonds that are shielded against inflation. With TIPS, the principal increases and decreases with consumer prices. TIPS pay interest bi-annually at a fixed rate that is applied to that adjusted principal. TIPS are issued at five, 10, or 30-year terms. Once they mature, you can either receive the adjusted or original principal. The danger with TIPS is that if inflation doesn’t go that high, your return with typical bonds could be better.
Commodities — raw materials like oil, natural gas, wheat and corn — are another good investment tool to protect against inflation. As US News reports, as the price of raw materials goes up, so does the price of consumer goods. That enables you to then get a good return on your commodities investments.
People will always need a place to live, so real estate is a good idea, too. Just like commodities, the value of real estate tends to increase when inflation is high — although to be fair, it has been increasing a great deal over the past few years. That means is that, sure, in the short term your returns might go down, but typically real estate value returns rather quickly as the economy improves.
*This guest article is from the “Your Money Blog” in Mid Oregon’s Digital Banking Credit Savvy resource. It is made possible by SavvyMoney. “Keeping Up” by Chris O’Shea was published in June 2022.
See additional articles by Chris O’Shea in the Mid Oregon View.