If you don’t really understand what inflation is, it’s the rate at which the value of a currency is falling. Naturally, when inflation occurs, the prices for everything, goods, and services, increase.
Inflation is natural for the economy so is deflation.
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 yourself.
Ways to Protect Yourself from Inflation
Currently, inflation is at an all-time high. With such high inflation rates, your idle assets are quickly losing their value. However, there are some ways you can protect yourself from inflation so that you don’t lose your savings.
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.
Best stock options in case of inflation are from companies with pricing power — they can raise prices on their customers if their costs rise due to inflation. And, as the profit of a company grows, so will its stock value.
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.
So, if inflation increases, so will the interest rate on TIPS.
TIPS pay out interest every 6 months and they come in three maturities of 5, 10, and 30 years. They are backed by the U.S. government so they are considered to be the safest investment option in the world.
3. Bank Loans
Inflation is not an inconvenience for everyone. Banks, for, example thrive at high inflation — they earn more money. Together with inflation, interest rates increase too, and so do the profit 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
Real estate is a valid investment option. It’s a great way to protect yourself from inflation because there is always a demand, it provides consistent income, and when the inflation rises, so do the property values and rent prices.
Besides, you could invest in a home for yourself, even. It might not seem like a good inflation hedge, but actually, if you use a mortgage to buy a house, you’ll have cheap funding locked in for several decades.
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 is a great option also because they have the potential to increase in value over time.
However, real estate is not a liquid option. If you want some liquidity, a great alternative would be real estate investment trusts. They can easily be bought and sold in the markets.
Real estate investment trusts are companies that own and operate various real estate properties — from residential, to industrial or commercial. The yield you’d get comes from rents and leases.
Bonds offer fixed payment rates which means that they won’t be affected by inflation. However, there are also floating-rate bonds where the interest rates increase as inflation rises. These make an amazing inflation hedge.
Gold is a traditional investment option and a popular inflation hedge. Gold is considered to be a stable investment able to withstand tough economic times.
Gold 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 to actually own and protect a piece of gold yourself.
One of the best ways to be secure in case of inflation is investing in crypto. Why? Because the crypto industry usually offers interest rates surpassing the inflation rates.
Overall, interest rates of the DeFi world are way higher than those of traditional finance — banks usually offer an average interest rate of 0,06% whereas the crypto market interest rates start at around 10%.
Bitlocus is a platform allowing people to take advantage of crypto benefits without going through tons of crypto procedures like creating a crypto wallet, buying crypto, exchanging crypto, etc.
The Bitlocus Investing Platform offers interest rates starting from 12%. Currently, the Bitlocus Investing Platform only offers stablecoin staking on the Anchor Protocol, but many more investment options will be available soon.
Don’t worry about the inflation with Bitlocus — earn high crypto benefits by barely lifting a finger!