Inflation rose to a high of 6.2% in October of 2021, the highest it’s been since 1990, but is today’s inflation transitory? What can you do to hedge it?
Quick Overview
- What Is Transitory Inflation?
- Is Today’s Inflation Temporary?
- How to Hedge Inflation
- Invest in Stocks
- Invest in Commodities
- Invest in Cryptocurrencies
- Save Your Money in a High-Yield Savings Account
- Invest in Real Estate
What Is Transitory Inflation?
Transitory inflation is another way of saying that the high levels of inflation are temporary and will not have a permanent or lasting effect on the economy.
Is Today’s Inflation Temporary?
Government officials indicate that today’s inflation rate is temporary. However, some expect it may take years for it to subside.
Although transitory inflation is considered good news, it has two downsides: time and uncertainty. Transitory inflation takes time to resolve, and it’s hard to predict when prices for goods and other commodities will come back to normal. Predicting the future presents a whole separate challenge.
How to Hedge Inflation
In the meantime, what can you do to keep up with inflation? Here are some ways to hedge it so that the value of your money grows and not the opposite:
Invest in Stocks
Investing in stocks is one of the most recommended ways to beat inflation. Stock values typically increase with inflation; the downside is that they can be volatile. Generally, however, they have steadily grown over time.
Invest in Commodities
Commodities, like precious metals or oil, consistently hold their value over long periods. That is not to say that it is a perfect strategy as both precious metals and oil have dropped in value in the past.
Invest in Cryptocurrency
Some will raise their eyebrows when they hear the word “cryptocurrency.”
Even though this digital asset is relatively new, certain types of cryptocurrencies such as bitcoin have a limited supply. This factor causes the value of a cryptocurrency to rise as demand increases, staying well above inflation.
Cryptocurrencies are not only still new, but they are also volatile. A bitcoin valued at $50,000 one day could suddenly drop to $40,000 the next day or vice versa. So it’s important to know what you’re willing to risk – do your research before investing!
Save Your Money in a High-Yield Savings Account
While this method may not keep up with inflation, it will certainly help slow the devaluing of your money.
A high-yield savings account is perfect if you intend to keep an emergency fund or hold any money that you can easily access long or short-term.
If you have not yet created an emergency fund, consider using our PrizePool app. It’s free to use, with no minimum deposits or hidden fees. Your funds will also earn a monthly savings bonus of 0.30% in interest, which is about seven times the national average.
Another advantage to using PrizePool is that we reward our users with the chance to win a weekly cash prize. You could deposit just $1, and you’d still have a chance to win one of the thousands of cash prizes. You could even win the monthly grand prize of $10,000.
Whether you win or not, your funds are yours to keep and FDIC insured.
Invest in Real Estate
Real estate is another type of investment that works well as a hedge against inflation.
If you’re a homeowner or planning on buying a home, your property will appreciate thanks to inflation. So if you’re living in a house for a significant amount of time, you could well make more than what you initially spent.
The other reason real estate is an excellent hedge against inflation, particularly for homeowners, is that most mortgage rates are fixed. So you won’t have to worry about rental costs increasing.
Inflation Is Overcomeable
Inflation is concerning, but it doesn’t mean there aren’t ways to overcome it. Learning how to hedge inflation is the best remedy to help you prevent your money from losing its value.