This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

What to Do When Inflation Comes Knocking

BOSTON ( TheStreet) -- Inflation is a scary word.

From the local coffee shop to the Federal Reserve, its post-recession comeback has been much feared. Anyone who lived through the astronomical price jumps of the 1970s will likely tell you those concerns are well-founded.

Inflation is knocking, but there are strategies that can hedge against rising costs and possibly even prove profitable.

Like trying to push back a waterfall, it won't be held at bay forever. Already, inflation is making itself felt, creeping back into the economy even as consumers shell out more for gas and groceries.

With, at the very least, modest inflation predictably on the horizon, retirees and pre-retirees typically have the most at stake. The former, living on fixed income, can ill afford more out-of-pocket costs for food, clothing and health care (including cost sharing in employer plans and Medicare Part B premiums). The latter, in a to-the-wire push to accumulate assets, may not relish the idea of their game plan being upset.

Is there a way to make inflation work to your benefit? Are there financial strategies that can not only hedge against rising costs but even prove profitable?

The good news is that inflation will possibly boost the value of your home, at least stanching the steady bleed of equity over the past few years.

There are also specific tools for the job at hand. You can buy Treasury Inflation Protected Securities, better known as TIPS, directly from the Treasury Department. Various mutual funds, such as the Vanguard Inflation-Protected Securities Fund (VIPSX), offer another way to easily incorporate these instruments to your portfolio.

To tackle inflation, one should understand the enemy.

Inflation will likely trigger the chain of events that leads the Fed to drive up interest rates. Surveys have shown that many passive investors fail to realize the damage that can hit their bond holdings when this happens.

Investors need "a clear understanding of the relationship between asset returns and inflation," a recent report from Vanguard suggests. "For those with long-term investment horizons, risky assets like stocks and bonds may earn returns high enough to overcome erosion in purchasing power due to inflation, on average. However, investors looking to hedge against inflation are typically concerned with short- and medium-term protection."
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
TROW $75.29 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%
TSLA $240.76 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs