6 Best Investments For Inflation  | A guide for entrepreneurs (2023)

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Inflation waswreaking havoc on the US economyfrom the coronavirus pandemic. National Consumer Price Indexincreased by 9.1% from June 2021 to June 2022. The increase was the biggest year-over-year jump in the US since the 1981-82 recession.

The price of energy became an issue after the Russian invasion of Ukraine. At its peak,Energy prices rose 42%from the same period of the previous year. Such a major jump has not been seen since 1980, when the Iranian revolution significantly reduced oil production.

Economically, the past year has been difficult, but this period of inflation is worse than it has been in more than 40 years. Consumerpurchasing power is much lower than it has been in decades, and you never know when it could be better. The higher rates may look a little bleak, but the current inflationary environment is not entirely hopeless.

There are many moves you can makewhich can protect your money from inflationand perhaps net profit in the long run.

What are the best investments during inflation?

Inflation is a perfectly normal phenomenon for the economy. While the 9.1% increase is extremely high, the annual inflation rateusually somewhere around 2% on average. In some cases, inflation may be negative until the end of the year. However, this is unusual and you should plan for an inflation rate of at least 2% each year.

The best option for maintaining personal finances when inflation rises is to keep a percentage of your moneyin long-term investmentsas part of a diversified portfolio.

For example, retirement accounts are commonly used as a way to slowly grow your money over time and keep up with natural increases in inflation.

The problem is that you can't access these accounts until much later in life. If you're looking for short-term inflation protection, you should look for an alternative method.

Here are six of the best investments you can make during times of high inflation. Most of these options are generally stable investments, but can be especially safe during times of inflation.

1.Real estate

Real estate isalmost always a great investmentand it should be at the top of your list. Under normal circumstances, commercial real estate isthe most profitable investment opportunity. However, the last few years have been anything but "normal conditions".

Working from home and hybrid work schedules could become the new norm, so commercial real estate is currently at a standstill. On the other hand, residential real estate is a hot market right now and could be where you should focus your attention.

Since 1991, the average annual increasein the value of the house is about 4%. This is more than enough to cover the average annual rate of inflation. Another advantage is that rental prices have skyrocketed. You can buy a new house for yourself, rent an existing one and charge a significant amount of money every month.

Of course, certain risks are inherent when you own multiple properties. The cost of financing the purchase and routine maintenance may mean you are unlikely to make a profit for some time. Also, there is always the risk of another crisis in the real estate market like the one in 2007-2008.

The good news is that you don't have to take these risks alone. Real estate investment trusts (REITs) are public companiesowning real estate and mortgages.

By investing in one of these, you will be able to experience the potential gains from real estate without buying real estate. The money raised can lead to larger purchases with much less personal risk.

2.Savings bonds

TheThe US Treasury sells savings bondswhich are designed to earn interest based on a fixed rate and one adjusted for inflation. The interest rate is set every six months and will change based on the current rate of inflation.

For example, the current rate for the I-Bond is 9.62% and is set until October 2022. The rate will increase or decrease based on the current state of the economy in the fall.

The good thing about I-Bonds is that they are both short-term and long-term investment opportunities. The I-Bond will only earn for 30 years, but you can redeem it after a year if you want.

However, if you redeem it before five years, you will beimposed a penalty of three months' interest. But after five years of purchasing the I-Bond, you can redeem it without any penalty.

3. Shares

Stocks are one of the most common investments in the USyou can become a billionaire, you can also lose a lot of money by making bad investments. Buying stocks is the riskiest option on this list, but the potential gains are worth talking to a brokerage or investment firm.

The key to investing in times of high inflation is to look for options where consumers can offset higher costs. For example, utility stocks usually pay dividends to their shareholders which can provide you with passive income.

The profits areless sensitive to market volatility. An increase in costs usually means an increase in prices for consumers, so profits are almost always positive.

Another solid investment strategy is to invest in an index fund. These options are available as mutual funds or exchange-traded funds (EFTs) and track a specific index, such as the S&P 500 or the Nasdaq 100. The money you use to buy the index fund is used to invest in all the companies included in this particular index .

Your fund will be as diverse as it can besignificantly mitigate inflation risks. Plus, you'll be able to get involved at a much lower cost than if you wanted to buy individual shares in each company.

4.Silver and gold

Silver and gold are precious metals that have been used as currency for centuries as a medium of exchange. The US dollar was backed by gold until August 15, 1971, when President Nixonofficially abandoned the gold standard. In the decades that followed, silver and gold remained strong investments for many people.

The best time to buy silver or gold is when the currency loses its value during periods of inflation. When the dollar weakens, goods become more expensive (more on that later).

Historically, silver has outperformed gold during inflation. However, gold is a more expensive option and approx70 times more expensive than silver. It might be a good idea to invest in both to protect your investment.

You will have two options for investing in silver and/or gold: buy them physically or invest in ETFs that track them. Buying silver and gold of course can be risky unless you know what you are doing.

You should be careful and make sure that what you buy is worth the price you pay. On the other hand, investing in an ETF can be a much safer bet and you won't have to worry about storage.

5.Rubber

As mentioned earlier, the price of goods usuallyincreases dramatically in periods of higher inflation. This creates a unique investment opportunity that can be extremely profitable if handled correctly. However, it is important to note that the price of goods is determined by supply and demand. You are just as likely to lose money investing in commodities.

The key to commodity investing is timing. Commodities such as oil, natural gas, grains, beef, coffee, cotton, soybeans and copper have seen their value increase in recent years.

Especially,the price of oil skyrocketedafter the Russian invasion began in late February 2022. Many people made a lot of money investing in oil as a commodity just before the price skyrocketed.

The same was true for the price of wood. The pandemic has severely disrupted the supply chain for wood and other building materials. However, demand remained roughly the same. As a result,the price of wood has skyrocketed, and shrewd investors managed to make huge profits.

Unlike silver and gold, most other products have a shelf life. It would be ridiculous to buy a ton of avocados and try to sell them at a profit. Look intoETFs that track specific commodity indices. You can safely experience potential windfalls from price increases without the risk of being stuck with expired merchandise.

6.Cryptocurrency

Cryptocurrency is a digital currency thatrecords transactions in a digital ledger known as blockchain. It is quite complex and still a very new investment opportunity compared to the other options on this list.

Much remains to be seen about how the cryptocurrency deals with inflation. It is a very risky investment option, but it also has the potential to have a very high reward.

The main reason why cryptocurrencies can be such a lucrative investment is the limited supply. Cryptocurrency mining isvery expensive and does not come with immediate rewards. As a result, the market is not flooded with a ton of new cryptocurrencies, which means that existing cryptocurrencies hold their value very well.

Another advantage is that cryptocurrencies are decentralized and not controlled by any government or financial institution. The lack of supervision makes the investment quite a gamble (as recent markets have shown), but allows for a much larger reward.

Investing in the other options on this list is probably a smart idea. However, you could see a huge return on your investment by buying some cryptocurrencies.

Invest today to protect your money from high inflation

A global pandemic has forced the entire world to change the way it operates overnightand lasted more than two years. Society may be slowly returning to normality, butthe economy will take a little longer, especially for those on a fixed income.

Inflation has recently rocked ithey affect almost every part of everyday life. The storm won't last forever, but it could stick around for a while and do some serious damage while it's here.

Protect your bottom line. Investing in some of the six opportunities listed above can help you save money. You can weather the storm of inflation andmaybe come out the other side with a solid profit.

The information provided in the Guide for Entrepreneurs is for educational purposes only. Your financial situation is unique and the products and services we review may not be suitable for your circumstances. We do not offer financial advice, consulting or brokerage services, nor do we recommend or advise individuals to buy or sell particular stocks or securities. Performance data may have changed since publication. Past performance is not an indication of future results