This article is reprinted by permission from NerdWallet. The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments. Inflation is scary. Groceries, gas, airfare, car purchases, utilities: In so many areas, your buying power is shrinking as prices continue to rise.
Fear can make you want to do something — anything! — to fight back. Thankfully, many of the best moves to counteract inflation align beautifully with time-tested money management practices. Here are three areas where smart strategies become even smarter when prices are rising.Invest with the long term in mind Advice about “inflation proofing” your investments often mentions gold, commodities and real estate. If you already have a well-diversified portfolio, though, beware of short-term strategies that could backfire, says Michelle Gessner, a certified financial planner in Houston. “Your best bet is stocks,” Gessner says. “Investing in equities is one of the best hedges against inflation that there is.” Gold hasn’t been a reliable inflation hedge since the 1970s, Gessner notes. Commodities — basic goods such as agricultural products, fuel and metals — can be profitable when inflation spikes, but returns over the long run have been disappointing. For the 20-year period ending April 29, for example, the S&P 500
stock index more than tripled while the Bloomberg Commodity Index was up about 30%. Real estate has a better track record, both during inflationary periods and for the long haul. But owning property directly can be a hassle, which is why many financial planners recommend mutual funds, exchange-traded funds or real estate investment trusts that invest in office buildings, apartments, hotels, shopping centers and other commercial property. But even there, people shouldn’t go overboard, Gessner says. She recommends that her clients invest 3% to 4% of their portfolios in real estate. “Everything in moderation,” Gessner says. “More is not necessarily better.” More: Why the Inflation Reduction Act is a very big deal for AmericansPay dow …