If you're unfamiliar with the term, inflation simply refers to the rate at which the value of a currency is decreasing. Naturally, prices for all goods and services rise when there is inflation.
Inflation is often described as the worst tax because it usually goes unnoticed by most, and does significant harm to all. That’s why it’s important to know how to protect your money.
Ways to Protect Your Savings from Inflation
Here are the top investment options (also known as inflation hedges) to consider when seeking protection from inflation.
Stocks are one of the best ways to protect yourself from rising inflation rates, especially long-term.
The best stock options in an inflationary economy occur from businesses that have the ability to raise prices on their clients if their costs increase. Moreover, a company's stock value will increase as its profit increases.
TIPS, or Treasury Inflation-Protected Securities, are a type of U.S. government bond. It’s a useful way to protect your investment from inflation since they are designed so that their value would increase together with inflation.
TIPS are available in three maturities: 5, 10, and 30 years, and they pay interest every six months. They are regarded as the world's safest investment option because they are supported by the U.S. government.
3. Bank Loans
Not everyone experiences the inconvenience of inflation. High inflation benefits banks, for instance, as they generate more revenue. Interest rates rise in tandem with inflation, as does the profit made from the loans.
Buying bank loans is a great way to earn high yields and protect yourself from inflation. However, it might take some time for a bank loan value to increase after the rates start to rise. So don’t hurry.
4. Real Estate
A real estate is a valid form of investment. There is always demand, it provides steady income, and as inflation increases, so do property values and rent prices. Investing in real estate is one of the best ways to protect your money from inflation.
Besides that, you could even invest in a house for yourself. Although using a mortgage to purchase a home may not seem like a good inflation hedge, you will actually have cheap funding locked in for many years.
Long-term and fixed-rate mortgages are very stable — even if inflation occurs, your monthly housing payment will remain. And it wouldn’t be the case with renting.
Real estate, however, is not a liquid option. Real estate investment trusts are a fine replacement if you're looking for some liquidity. They can easily be bought and sold in the markets.
Residential, commercial, industrial, and other real estate types are owned and managed by real estate investment trusts. The yield you’d get comes from rents and leases.
Bonds have fixed payment rates, so inflation won't have an impact on them. However, there are also bonds with floating interest rates, whose rates rise along with inflation. These make an amazing inflation hedge.
Gold is a traditional investment option and a popular inflation hedge. Gold is considered a stable investment able to withstand tough economic times. It is one of the oldest investment options in the world and its reliability has long been proven.
A good option to invest in gold is through Exchange Traded Funds (ETFs). You won’t have actually to own and protect a piece of gold yourself.
Investing in cryptocurrencies is one of the most effective ways to be safe from inflation. Why? Because interest rates in the cryptocurrency industry frequently outpace inflation rates.
Banks typically offer an average interest rate of 0,06%, whereas interest rates on the cryptocurrency market can be 10% or even more. In general, interest rates in the DeFi world are significantly higher than those in traditional finance.
Bitlocus is a platform that enables users to benefit from cryptocurrency features without having to go through tons of crypto-related steps like setting up a cryptocurrency wallet, purchasing crypto, exchanging crypto, etc.
As a gateway to DeFi investments, Bitlocus offers interest rates of up to 24% (this particular interest rate is valid for staking BTL tokens). Currently, the Bitlocus platform offers lending, staking & farming options.
Put your idle assets to work and protect your money from losing value! Explore our DeFi marketplace.