Schaeffer’s Investment Research Review Explains Why Some Assets Are Inflation Resistant
Worried about inflation? The investing experts at Schaeffer’s Investment Research Review cover inflation-resistant assets.
Inflation surged to 7 percent in December, the highest amount on record since the early 1980s. As inflation occurs, money loses value on a per-dollar basis. In other words, a $100 today will be worth more than a $100 would be after ten years of inflation. For investors, hedging against inflation is vital, notes the experts at Schaeffer’s Investment Research Review. Fortunately, you can hedge against inflation by investing in inflation-resistant assets.
“Over time, inflation can reduce your wealth. And high inflation, in particular, is a grave threat that could end up costing you a lot,” notes a spokesperson for Schaeffer’s Investment Research Review. “By investing in inflation-resistant assets, you may be able to hedge against inflation.”
So what assets are resistant to inflation? Let’s start by identifying some inflation-resistant investment opportunities. Gold is one of the most commonly cited examples. Other precious metals, such as silver and platinum, are also known for being inflation resistant.
Property is another investment that often proves resistant to inflation. Right now, inflation is high and so too are home and property prices. Those folks who bought a home a few years ago may have been able to build a lot of wealth in recent months while also protecting their finances from inflation.
The experts at Schaeffer’s Investment Research Review note that one of the most important aspects of inflation-resistant investments is limited supply. There’s only so much gold in the world. In fact, all the mined gold in the world could fit into four Olympic-sized swimming pools.
The supply of homes can grow. However, building new homes takes a long time, and ultimately, land is limited. You can find plenty of land for sale in many deserts, but if you want to live close to a major city, there’s only so much space. Thus, property is typically a supply-constrained asset.
“Supply and demand are vital for markets in general,” says a spokesperson for Schaeffer’s Investment Research Review. “With inflation-resistant assets, limited supply and high demand typically mean rising prices. Even as inflation grows, so too may your wealth.”
One popular investment option in recent years has been bitcoin and other so-called cryptocurrencies. Back in January 2020, just a few months before the COVID-19 pandemic became a global emergency, Bitcoin was trading at less than $10,000 per coin. In recent weeks, Bitcoin has cost north of $50,000 per coin.
Many investors now believe that Bitcoin could act as a safe-haven asset resistant to inflation. Why? Governments can increase the money supply on a whim. The American government has increased the money supply rapidly in recent months. Many believe that low-interest rates and easy access to money are a driving force for inflation.
Meanwhile, bitcoin production is limited and the total number of bitcoins available is fixed. There’s no way to quickly pump new bitcoins into the market. Similar to gold, Bitcoin must be “mined,” which takes time and energy. The experts at Schaeffer’s Investment Research note that cryptocurrencies offer a lot of upsides, but also caution that the risks are quite high as well.