4 Options to Beat Inflation in the Future

A recent piece in Forbes offers 4 suggestions for beating inflation. After noting that “the present 0% rate [of inflation] blends an upward march of 2% in the cost of services with a collapse in the price of oil,” the article observes that “if commodities rebound over several years, 4% inflation could surface.”

To protect against this risk, the article explores 4 options:

  • Treasury Inflation-Protected Securities (TIPS): These offer real protection for the principal invested, but a very low rate of return. Funds that roll over maturing bonds offer more liquidity, but do not provide the same guaranteed protection.
  • Gold: Drawing on research by Gregory King of Rex Shares, the article notes adding 10% gold to a 60/40 stock/bond mix would have reduced volatility by 0.7% while shaving 0.2% off the return. Thus, gold is seen as “a probable but not certain cushion against double-digit inflation,” which might be combined with TIPS.
  • Resource Stocks: Investing in natural resource producers may offer long-term protection, despite short-term volatility, because the price of resources are projected to climb due to increasing challenges in securing such resources and near-certain future demand.
  • Real Return” Funds: These funds seek to provide a “real return” measured against the Consumer Price Index (CPI) measure of inflation, often by trading in CPI swaps, and “they offer the prospect of doing better than TIPS in some markets.”