4 of the best inflation hedges

by admin on June 11, 2011

You will have probably heard that in recent months, many of the major economies have resorted to printing money to try and tackle the global financial problems we have been having.

This undoubtedly presents a potential inflation risk. Some of the best ways to hedge against inflation include:

Property

If you can afford it, put your money into property. In most economies, property has beaten inflation in the long term. Obviously, don’t buy at the top of a big boom like we saw in the early 1990′s. Often the best time to buy is after a crash.

Blue chip stocks

Buying a variety of blue chip stocks has historically worked well against inflation. However, always be sure to select stocks from a variety of different sectors to lower the risk.

Savings

Always make sure you are getting the best interest rate on your savings. Many banks offer introductory offers that can bolster your returns. bankrate.com is a helpful comparison site for Americans and moneysupermarket.com for people in the UK. Historically, the best paid savings accounts have been above inflation.

Diamonds

Diamonds are often over looked. They can be one of the best hedges. However some knowledge of the diamond market is essential. Historically the right diamonds have not only been an excellent hedge against inflation, they have almost been a great long term investment.

There are many other common inflation hedges, but I personally see them as too risky:

Gold

Many people see gold as an inflation hedge. It’s a fairly dubious one in my opinion. In the past gold has done well in times of crisis. For me it’s more of a “crisis hedge” than a hedge against inflation. There have been long periods of inflation where gold has fallen in value.

Oil

Oil like many other commodities will inevitably be affected by inflation, but the high volatility makes far too risky to be a good hedge.

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