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Posted by Mike on April 21, 2009, 5:27 pm
I am interested in knowing the preferred strategies from the group if
one were to assume an increase in inflation over the next several
years. Thanks for your input.
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Posted by dapperdobbs on April 21, 2009, 7:11 pm
> I am interested in knowing the preferred strategies from the group if
> one were to assume an increase in inflation over the next several
> years. Thanks for your input.
Bonds are the tradtional 'loser' during inflation, as well as cash,
but at this moment in markets, cash has been a big winner. The
question, as you accurately see it, is what to convert the cash into
if inflation is around the corner.
One obvious home for your inflation-proof money is a home
(literally :-) Housing prices are well off their highs, some think
they may have bottomed, and a home is a very big-ticket, inflation-
sensitive item with immediate personal utility.
If you have all the real estate you want, my next bet is stock in a
company with products or services that are either best-in-world or not
easily imported. By purchasing part of "the establishment" you have an
inflation hedge. By purchasing increasing sales and earnings, as well
as possibly increasing dividends, you have a "kicker." You have an
income stream, and the AICPA definition of liquid assets.
Gold is usually highlighted (as if the shiny-yellow needed
highlighting :-) and if you can justify the holding and transaction
costs, I suppose gold or silver are good for retention of value, but
be very mindful of your market timing.
I think the idea behind inflation hedging is to hold "real
value" (that which money buys), as opposed to "buying money." Make
sure you keep cash for expenses :-)
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Posted by PeterL on April 22, 2009, 12:32 pm
> I am interested in knowing the preferred strategies from the group if
> one were to assume an increase in inflation over the next several
> years. Thanks for your input.
TIPS, gold/precious metals, materials, real estate.
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Posted by Mike Morgan on May 11, 2009, 7:03 pm
One way is to buy real estate investment trusts (REITs). Landlords raise
rents in times of inflation, so REITs are an effective hedge. Buy the
equity type, not the mortgage type. One simple way is through the Vanguard
Equity REIT index mutual fund. REITs are depressed right now (aren't we
all), but recovering.
Mike
>I am interested in knowing the preferred strategies from the group if
> one were to assume an increase in inflation over the next several
> years. Thanks for your input.
>
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Posted by Igor Chudov on May 11, 2009, 9:13 pm
Over a long enough time, buying a stock market index fund, should
decently keep up with inflation.
i
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