Smart investments for inflationary times

As if all the recent talk about recession wasn’t bad enough, now it’s inflation—the result of a higher than expected rise in the Consumer Price Index during January. There’s even talk of stagflation, a slow-growth high-inflation combo that many of us remember unfondly from the 1970s. If you weren’t around in the ‘70s, let’s just say that stagflation was even worse than disco.

What should investors be doing with their money? Here are a few ideas from a recent issue of Consumer Reports Money Adviser newsletter.

• Stocks. Traditionally, stocks have been seen as the best inflation hedge over the long haul, although some experts are beginning to question that wisdom. Rather than speaking of a pie chart split between just stocks and bonds (say 60 percent one, 40 percent the other), they’re likely to recommend a much more diversified portfolio, including the following items.
• Real estate. Investment real estate is one option, but that ties up your cash in a relatively non-liquid asset. And if you become a landlord, you will have to collect rent and fix furnaces. A more leisurely and liquid approach is to invest in real-estate mutual funds, exchange-traded funds, or a real-estate investment trust. Bear in mind, of course, that real estate has its own woes at the moment.
• Commodities. A generation or two ago, we’d have been referring to gold bars; in more recent times, mining stocks. Now financial planners often recommend having a small slice of mutual funds or ETFs that invest in a range of commodities—everything from platinum to pork bellies. The reason is twofold: In times of serious inflation, these kinds of assets often rise in value. Plus, their price movements tend to have little correlation with the stock market, making them a good diversifier in general.
• TIPS. Known formally as Treasury Inflation-Protected Securities, these bonds have two components: a fixed rate of interest rate plus an adjustment pegged to the Consumer Price Index. They’re sold in $1,000 increments and come in 5-, 10-, and 20-year maturities. For more about TIPS and how they work, go to Treasury Direct.
  

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Thanks so much for writing this real estate blog. There are so many aspects to real estate buying , selling and investing that it is refreshing to read material that is relevant to real estate.