I am by no means an expert, but one thing I have heard may be an option is Series I Bonds, which, if I understand correctly, pay interest equivalent to the inflation rate.
If you have a small amount to invest, I recommend looking at the Series I savings bonds. You are limited to buying about $10,000 worth per year, but they're pretty simple financial instruments, and you can easily understand how they will act.
You can buy arbitrarily large amounts of TIPS, but TIPS are actually pretty complicated securities. I do not advise against their purchase, just make sure that you understand what you are buying and how it behaves in difference circumstances before you invest your money
I just purchased $10k of I bonds for this reason. They’re easy to understand. TIPS learning curve seemed much higher, to the point I’ll have to dedicate some time to understand then before even attempting to buy them. Though I suppose I saw the minimum investment for TIPS is $100, so might be worth learning by doing.
The tricky thing about TIPS is that they don't pay interest based on inflation. Instead, they're a normal bond with some pretty low interest rate, but then periodically the principal amount of the bond is adjusted upward for inflation.
This makes TIPS behave weirdly in periods of deflation or of high inflation. (Increasing the principal of your bond by 10% doesn't increase your semiannual coupon payments very much -- but then at maturity your bond will be worth a lot more). The rules aren't that complicated, but scenario planning for what happens to you is tricky.
I just ordered $100 TIPS from Treasury Direct... now, if I want to sell it before maturity, it says I need to transfer it to a bank or broker and have them sell? Have you done this? If so, does a bank/broker charge to do this? When it comes to taxes, does the Treasury now send something that shows the interest they have paid? 1099-Int or something? lol. Learning by doing :).
I have not done this. I've only bought Savings Bonds from TreasuryDirect, mostly because the website is absolute ass. Whenever I've contemplated buying "Treasury Marketable Securities", I've always just looked at using my broker.
Every year, you'll get a 1099-INT for the coupon payments.
But yes, if you want to sell not-at-maturity, you'll transfer it to a broker. That transfer should be in-kind and should not have any tax reporting consequences.
When you sell you will get a 1099-B and your broker might not know your cost basis, so you may get a reported basis of zero and have to correct it. Or you might get the correct cost basis.
I'm investing in backyard meat production, rabbit hutches, chicken coop, greenhouse for growing fodder, etc. I'll swap securities for this. For a fraction of my savings and a bunch of actual work we can make most of our calories independent of exchange rates and supply chains. And if the economy stays afloat that's a few hundred dollars of lower grocery bills per month to put back into securities.
Rural residential multi-acre lot, plenty of room for hutches, not clear if it's big enough for a rooster and me to co-exist.
In the vicinity of 640ft^2 covered space, 2000ft^2 total.
Yes, stainless steel sink and counter in the garage. Rabbits are alarmingly easy to process if you aren't preserving the pelts. Chickens will be mostly for eggs.
Salted and frozen in vacuum sealed bags. If I can't keep them cold, smoke the frozen ones, and start harvesting them just-in-time.
Deep freeze in the garage, on deck meat in the kitchen fridge/freezer, then straight from frozen into the sous vide tank.
There is no perfect answer, because you can't know in advance exactly how this will all play out.
If you could know for certain that inflation would remain very high for an extended period, you could buy a mixed bag of commodities. Inflation is a generalized increase in prices, and if inflation continues long enough, it would eventually become extremely broad-based, meaning that the cost of ~every useful thing would increase. Commodities are fungible useful things. Gold and silver are popular (personally, I like silver better for reasons that I won't get in to here), but you can also buy even more "useful" commodities -- copper, for example. Or energy in all sorts of forms[1], or certain kinds of foodstuffs Depending on how much financial destruction you think there will be, you can buy physical stuff and hang on to it, or, if you think the systems will mostly survive intact, you could buy long-dated futures contracts for these products.
Make sure you fully understand the contracts you are buying before you actually buy them.
Futures are complex financial instruments, and you can easily lose more than all of your money if you fail to understand what you are buying and make poor choices. (Read up on what happened during the time in 2020 when oil had a negative price. Lots of neophyte investors got really hurt)
I do not specifically advise buying commodities. I don't personally play in the futures market. But, if you wanted to explicitly invest against inflation, that's an approach you can take. Keep in mind, of course, that while stocks are fractional interests in companies, and companies are productive assets -- they make more stuff/value/money over time -- whereas commodities are not productive assets. Over time, your commodity costs money to store, and the amount of stuff doesn't grow. That means that by tying your capital up in physical commodities, you are foregoing the opportunity to own a production stream. If inflation exceeds economic growth, that is likely to be a good bet. If economic growth exceeds inflation, it is likely not to be.
--
[1] Keep in mind that some commodities have shelf lives. Some energy commodities have really, really short shelf-lives. Obviously, food commodities have shelf-lives as well.
The short answer is no. In a negative real interest rate environment, there is by nature no safe way to keep up with inflation. You will have to reach out into the risk spectrum to try to beat the risk free rate and there is no one "safe" answer on how to approach that. If you don't have any in depth opinions on that, you are probably best keeping your money in a tradition 60/40 portfolio, maybe with a commodities addition if you feel that provides extra diversification against inflation (I think it does)
As someone else mentioned. Owning as much as possible regarding your day to day necessities is another way to approach this. If you own your own land, house, and vehicle and grow a substantial portion of your own food, your are much more detached from price changes than the average person.
Aren't TIPS just bonds with a coupon linked to an inflation measure? If the price of these bonds is traded in a free floating manner, like on an exchange or via an auction then you can still massively lag inflation by buying them.
I see no one mentioned real estate. While i do think there will be a crash it will be temporary. Real estate always goes up. Broken pipes dont keep me up at night. Stock market fluctuations do. Likely not a means to get rich. But the property value gain coupled with rent income add up and can help weather the storm. This is my personal experience. Had decent >30% returns on a couple of 3 year long investments, sold out, waiting for a crash. My tenant who said he doesnt want to buy a property because its too much hassle is now down 1 mil $. I spent 200£ fixing a failed bathtub and oiling a window handle. Such is life.
* Buy PUT options on the underlying x quantity of $STOCK (treat this as the insurance; you can choose to either pay a premium over the purchase price or a discount over the purchase price).
* Sell CALL options on the underlying x quantity of $STOCK (treat this as rent on your asset).
If the $STOCK loses in value, exercise your PUTs to protect value of invested capital.
If the $STOCK gains in value, chances are the buyer of the CALL options you sold exercises their option. You still make a profit (although lower than selling at market rate which is higher than the CALL option exercise price). But you get cash (with profits) which you can then roll over into your next $STOCK + CALL + PUT transaction.
The strategy works regardless of market sentiment.
The answer will depend on who you ask and what your goal/strategy is. There are numerous places like TastyTrade that go over picking dates and price points.
Ideally, for this strategy, the PUT is an insurance, so you can buy the longest available period that is priced optimally.
The sold CALL is nearest-date expiry.
After the CALL expiry date, you sell another CALL option and repeat this until the PUT option that you own expires (upon which you can buy a new PUT option and continue the strategy). You collect dividends on the underlying + the premiums on the sold CALLs.
Your long-term profit would include the dividiends + CALL premiums - PUT option purchase price while being protected from drops in the stock value.
In the event of a sold CALL or PUT exercise scenario, you also have capital gains adding to the profit.
You'll have to be careful on this. You need to make sure you buy back your calls before executing a put if we enter some wild volatility. Many platforms don't allow you to automatically do this, which means you have to manually manage it. You'd be better off finding an ETF that uses a similar strategy, especially since you can gain some tax efficiency that way.
You have underlying $STOCK that you have to cover the sold CALL options. When the counterparty exercises their CALL (because the market price is higher than the strike price), you can meet that obligation with the underlying stock.
After you meet this obligation, you have the option of letting the PUT expire without exercising it.
The purpose of the PUT is to help you safeguard drop in value of the $STOCK investment (in the OP's question - a hedge against inflation impact on the investment).
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[ 3.3 ms ] story [ 78.1 ms ] threadhttps://www.treasurydirect.gov/indiv/products/prod_tips_glan....
You can buy arbitrarily large amounts of TIPS, but TIPS are actually pretty complicated securities. I do not advise against their purchase, just make sure that you understand what you are buying and how it behaves in difference circumstances before you invest your money
This makes TIPS behave weirdly in periods of deflation or of high inflation. (Increasing the principal of your bond by 10% doesn't increase your semiannual coupon payments very much -- but then at maturity your bond will be worth a lot more). The rules aren't that complicated, but scenario planning for what happens to you is tricky.
Every year, you'll get a 1099-INT for the coupon payments.
But yes, if you want to sell not-at-maturity, you'll transfer it to a broker. That transfer should be in-kind and should not have any tax reporting consequences.
When you sell you will get a 1099-B and your broker might not know your cost basis, so you may get a reported basis of zero and have to correct it. Or you might get the correct cost basis.
This will be interesting, getting a 1099-INT for interest on $100 of TIPS.
You still owe the tax, and they might 1099 you.
Ars had an article recently about urban backyard chickens making eggs with lots of lead in them due to soil pollution.
How much space does it take up?
Do you actually do the slaughtering,and if so, how do you maintain a hygienic station?
What's your technique for brining/preserving cuts?
Do you keep a meat locker or stuff all your cuts in a refrigerator?
In the vicinity of 640ft^2 covered space, 2000ft^2 total.
Yes, stainless steel sink and counter in the garage. Rabbits are alarmingly easy to process if you aren't preserving the pelts. Chickens will be mostly for eggs.
Salted and frozen in vacuum sealed bags. If I can't keep them cold, smoke the frozen ones, and start harvesting them just-in-time.
Deep freeze in the garage, on deck meat in the kitchen fridge/freezer, then straight from frozen into the sous vide tank.
If you could know for certain that inflation would remain very high for an extended period, you could buy a mixed bag of commodities. Inflation is a generalized increase in prices, and if inflation continues long enough, it would eventually become extremely broad-based, meaning that the cost of ~every useful thing would increase. Commodities are fungible useful things. Gold and silver are popular (personally, I like silver better for reasons that I won't get in to here), but you can also buy even more "useful" commodities -- copper, for example. Or energy in all sorts of forms[1], or certain kinds of foodstuffs Depending on how much financial destruction you think there will be, you can buy physical stuff and hang on to it, or, if you think the systems will mostly survive intact, you could buy long-dated futures contracts for these products.
Make sure you fully understand the contracts you are buying before you actually buy them.
Futures are complex financial instruments, and you can easily lose more than all of your money if you fail to understand what you are buying and make poor choices. (Read up on what happened during the time in 2020 when oil had a negative price. Lots of neophyte investors got really hurt)
I do not specifically advise buying commodities. I don't personally play in the futures market. But, if you wanted to explicitly invest against inflation, that's an approach you can take. Keep in mind, of course, that while stocks are fractional interests in companies, and companies are productive assets -- they make more stuff/value/money over time -- whereas commodities are not productive assets. Over time, your commodity costs money to store, and the amount of stuff doesn't grow. That means that by tying your capital up in physical commodities, you are foregoing the opportunity to own a production stream. If inflation exceeds economic growth, that is likely to be a good bet. If economic growth exceeds inflation, it is likely not to be.
--
[1] Keep in mind that some commodities have shelf lives. Some energy commodities have really, really short shelf-lives. Obviously, food commodities have shelf-lives as well.
As someone else mentioned. Owning as much as possible regarding your day to day necessities is another way to approach this. If you own your own land, house, and vehicle and grow a substantial portion of your own food, your are much more detached from price changes than the average person.
Actually there is, it's called TIPS.
Because population always goes up, for now. Wait until population starts to shrink...
* Buy x quantity of $STOCK.
* Buy PUT options on the underlying x quantity of $STOCK (treat this as the insurance; you can choose to either pay a premium over the purchase price or a discount over the purchase price).
* Sell CALL options on the underlying x quantity of $STOCK (treat this as rent on your asset).
If the $STOCK loses in value, exercise your PUTs to protect value of invested capital. If the $STOCK gains in value, chances are the buyer of the CALL options you sold exercises their option. You still make a profit (although lower than selling at market rate which is higher than the CALL option exercise price). But you get cash (with profits) which you can then roll over into your next $STOCK + CALL + PUT transaction.
The strategy works regardless of market sentiment.
The sold CALL is nearest-date expiry.
After the CALL expiry date, you sell another CALL option and repeat this until the PUT option that you own expires (upon which you can buy a new PUT option and continue the strategy). You collect dividends on the underlying + the premiums on the sold CALLs.
Your long-term profit would include the dividiends + CALL premiums - PUT option purchase price while being protected from drops in the stock value.
In the event of a sold CALL or PUT exercise scenario, you also have capital gains adding to the profit.
After you meet this obligation, you have the option of letting the PUT expire without exercising it.
The purpose of the PUT is to help you safeguard drop in value of the $STOCK investment (in the OP's question - a hedge against inflation impact on the investment).