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How To Guard Your Investments Against Inflation

Posted on 19, Feb, 2013


If you're smart you have an investment portfolio which you've been nurturing for the last few years at least, but no doubt the recent global economic turmoil has you worried. An incredible national deficit of well over $15 trillion dollars has put the United States at the distinct risk of suffering from rampant interest increases, which could then lead to inflation and possibly even hyperinflation. If you don't understand what hyperinflation means all you need to know is that you'd need a suitcase full of cash to buy a single loaf of bread; in effect paper money becomes worthless.

Now the idea of the American dollar becoming effectively worthless is a scary proposition but it is possible and in these troubled financial times it's a very good idea to take some steps to protect your investment portfolio over the long term. In the minds of some people the days of paper currency are coming to an end and it may not be too long before we see a return to the Gold Standard which was abandoned almost 100 years ago.

When you have billionaires openly admitting that they consider paper currency now effectively worthless that's always a sign you need to sit up and pay attention.

So what steps can you take to protect your hard-earned cash?






Use T.I.P.S

We're not sure if the term "T.I.P.S" is a happy coincidence or whether somebody in the Treasury Department was having an inspired moment but the fact remains that Treasury Inflation-Protected Securities are usually one of the first tips given out by any consultant advising on how to hedge against inflation/hyperinflation. These securities basically increase with inflation and then decrease with any deflation which occurs, interest being paid out twice yearly at a fixed rate. You can start with as little as $100 to invest in TIPS but there is an upper ceiling of $5 million.

Real Estate

This is contrary to what many people are saying at the moment but the fact remains that real estate has never achieved a "zero" value in the history of humanity, and in fact during a major recession real estate can be acquired for a fraction of what it normally cost. Obviously you'll need to spend your money wisely and invest in properties that have long term value, as in there's no point in buying up entire tranches of a ghost town and hoping to flip it for 5x the value later on. You don't need to go "all in" with real estate but it does provide a very cost efficient way of diversifying your portfolio.

Precious Metals

Those in the know have always kept actual physical precious metals as part of their overall investment, including both silver and gold. Obviously these would need to be stored in a secure location and not actually in your home or office. Right now there's a lot of interest in gold and a Troy ounce is currently reaching historic highs of in excess of $1,500 per ounce, but the market is fierce. Silver, on the other hand, gives you a far more cost effective and equally valuable way to get yourself onto the precious metal financial "ladder".

The message here is simple - diversify your investment portfolio while you still can and do your best to limit your trading or investment in paper currency

Tags: #investments

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