What to Invest in During Inflationary Times

Inflation is the increase of prices for all goods and services. During these inflationary times, the value of the dollar decreases, as does its purchasing power. Not all types of investments fare well when inflation is high. However, there are a few types of investments that are good choices during these economic periods.

Most people invest their money to make a profit. Experienced investors know that inflation erodes the purchasing power of a dollar and reduces the value of their investments. Fortunately, a few investment vehicles do well during inflationary times and are available to all types of investors.

Real Estate

As inflation increase, so does the value of real estate properties. There is a fixed amount of land so real estate is always in demand. Historically, the value of real estate increases regardless of economic conditions. The best source of real estate during inflationary times is established properties such as rental properties or residential homes. Building new homes or apartment buildings is not a good investment during inflationary periods. The cost for building supplies and labor reduce any expected profits.

The easiest way to invest in real estate is with real estate investment trusts or REITs. The trusts are similar to mutual funds. A group of people pool their money to purchase real estate properties. The management team of the REIT handles all the details such as choosing the property, arranging the sale and managing the property.

Commodities

Another good investment for inflationary periods is commodities. Commodities are tangible goods that are always in demand such as oil, lumber, wheat, corn, gold and silver. These commodities have a fixed supply so prices increase due to the demand. The easiest ways to invest in commodities is with commodity mutual funds, but a person can also invest in commodity futures or stocks. Futures are a complicated form of investment, but they can also yield substantial profits in a short period of time. Commodity stocks include gold stocks, energy stock and similar stocks related to commodities.

When inflation is high, it is a good idea to buy investments that increase in value during such times. Investment advisors often suggest real estate and commodities to counteract the problems caused by high inflation rates.