When dealing with inflation, it is fundamental to understand money is not the only store of value and if an inflationary period is to be expected, investment is best made in assets which have a track record of outperforming the market during similar periods.
As such, when inflation hits, investors seem to gravitate towards two particular assets: Gold, and Silver.
Knowing the signals of an impending inflation period is half the battle, while the other half is creating a sound, inflation proof portfolio.
As such, let’s look at two simple solutions which may be of great help.
We can all agree that gold has been a trusted store of value for over two millennia now.
Often regarded as a safe-haven asset, gold prices rise during periods of high inflation or financial uncertainty which, to no surprise, makes it the preferred investment in these times of trouble.
Moreover, gold, much like silver, has intrinsic value as a commodity, meaning that there is demand for it outside its basic functions of money.
In fact, Gold has outperformed inflation in the last 40 years and, as you would expect, it has recently hit a 5-month high as inflation surges on.
Gold has long been seen as a safeguard of purchasing power in the long run against more than just the price of goods and services.
When looking at the overall money supply, gold can also help investors protect against potentially excessive asset price inflation and currency debasement.
Silver’s future is exciting and its past and present has been described as a bumpy ride.
Most portfolios would typically only allocate a small amount of silver, as a play designed to stem potential losses while the market is facing periods of downward pressure, meaning that when a downturn finally took place, your losses might be comparatively less than the stock market’s.
As such, many investors would think that increasing his or her silver allocations past a certain amount had some serious opportunity costs.
However, with silver having more room to grow based on its long-term historic average price ratios, things might take an interesting turn.
The bottom line is that wise investors will try to hedge inflation over time and not every time.
As such, any of these three picks seems like a reasonable choice when thinking inflation and long-term strategy.
Any investment is inherently betting on something and investing in either Gold or Silver, in its essence, going long on fear.
And as inflation is now far from being “transitory” these might actually be the best bet.