The 7 best investments you can make to protect yourself from inflation

Inflation is one of the biggest threats that your pocket can suffer.When the price level goes up your money is worth less and you cannot acquire so many goods with it, so it is so important to fight it.

To have healthy finances it is necessary to protect yourself against inflation.A good investor is able to plan to what extent your money can be affected when the market economy enters an inflationary situation.In this way, their finances will not suffer so much.

There are certain investments such as gold, real estate or certain basic products that will help you avoid this problem.

Below are the 7 best investments you can make to protect yourself from inflation.

Real estate assets

This is one of the best options at your fingertips so that inflation affects you as little as possible.Properties are a natural protection against inflation, since rentals tend to increase when prices do.

Rental contracts usually update income according to the progress of prices, and also involve constant income for those who do not have to perform a great effort.

Buying a home and putting it for rent can go very well in the long term if you have made a correct investment.

Prayed

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Traditionally it has been thought that gold is the best asset you can have to protect yourself from inflation.

However, this is half truth.Gold works very well in moments of inflationist shocks, for example during the 70s in the United States this asset could keep the pulse.

But inflation rose again in the late 80s and the behavior of gold was different, since its value ended up sinking.

In any case, if you are going to invest in different assets to overcome inflation it is a good idea that you take into account gold.

Raw Materials

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In the raw materials, products of all kinds are included: grains, electricity, precious metals, oil, orange juice, natural gas or beef.

This is a good investment because these raw materials are usually anticipated to inflationary stages.If the price of a merchandise increases so of the products that are necessary to prepare it.

Of course, raw material prices are very volatile, so in these cases there is always a certain risk.

Bag

Investing in the stock market is the best long -term asset.Its profitability is above all asset categories and is a good insurance against inflation.

The best decision in this regard is to invest in companies that are dominant in their sector and have power when setting prices.During an inflation stage these companies manage to maintain the margins because they manage to transfer the price increase to consumers.

But this strategy also entails certain risks: when the end of inflation is approaching the actions of these companies usually fall.

Socimis and real estate investment funds

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You already know that investing in the real estate sector is a great lifeguard against inflation.In addition, it is not necessary to buy a home to position yourself in this market.

Betting on socimis and real estate investment funds are great alternatives for which a large amount of money should not be moved.

The socimis (real estate investment societies) are quoted in the Spanish stock exchange and much of their business consists of the purchase, promotion and rehabilitation of urban assets that are usually allocated to the rental.

Colonial or Merlin Properties are some of the most relevant socimis in the Spanish market.

As for real estate investment funds, its main advantage its main advantage is that they are very diversified products, so the risk is reduced.

Tips: Bonds for inflationary stages

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Protected bonds against inflation or tips for its acronym in English are fixed income assets that serve to cover investors due to the decrease in purchasing power of their money.

To understand how an example is enough: if you invest 10.000 euros in tips with a 1% yield you will get 100 euros with the first coupon, but if inflation rises 5% the capital adjusts and grows to 10.500 euros.Profitability is the same on the amount of the bonus.

60/40 portfolio

A 60/40 shares portfolio is a traditional and safe combination, especially in quiet times.Its long -term annual profitability objective is between 5% and 6%, adjusted to inflation.

In the long term it is an attractive investment, the negative point is that it requires a good initial amount and having sufficient financial and economic knowledge if you do not want to hire an advisor to do the work for you.

Some experts warn that the crisis of the Coronavirus has ended the potential of this classic investment portfolio, although we will have to wait time to confirm that this is true.

[Sources: Investopedia, the Salmon Blog]