Comments on: What’s the best inflation hedge?

By: Jason

Jason — Tue, 19 Aug 2008 23:24:13 +0000

Precious metals are no longer a good hedge against inflation. The problem is that there are now ETFs like GLD and SLV that have made gold and silver trade like stocks. Also gold and silver run up like other commodities do when manufacturing demand is high. When economies go into recession it reduces global demand on gold and silver. I would invest only on a major pullback or selloff, like the current one, and totally without leverage.

By: Janni

Janni — Wed, 26 Mar 2008 00:53:34 +0000

In your fight against inflation, the safest inflation hedge you can have is disciplined management of your personal debt. Managing debt effectively may not be as exciting as investing in the latest hot stock market sector or squirrelling away gold bullion in a vault hidden in your mother-in-law’s back forty, but it will give you a superior return on your effort and will free up scarce funds that you can invest productively later.

By: Moose

Moose — Thu, 03 May 2007 01:43:29 +0000

No, Micah, you’re right. No need to put extra equity into the house if the value will increase anyway due to inflation. I’m just debt averse and let that cloud my judgements…

By: Micah

Micah — Tue, 01 May 2007 08:57:28 +0000

If you have a fixed rate mortgage, where your interest rate is pinned low, every penny that you have leveraged on that property (meaning NOT in equity) is a hedge against inflation. Once you are out from under PMI and paying a low interest rate on a regular schedule, why would you want to pay ahead if your interest rate is below current rates? To take out equity later when overall interest rates are lower? Yes, the property itself is a hedge against inflation, but paying more money into your mortgage doesn’t increase the value of the property or increase your ownership/use of it. As long as you can make your mortgage payment through the life of your loan, you own 100% of the house from the day you buy it until the day you sell it. Or maybe I’m confused by your idea.

By: Moose

Moose — Mon, 30 Apr 2007 02:41:00 +0000

I’m a big fan of diversification, so diversify among all these inflation hedges to help you mitigate the risk of buying one at the top. A little TIPS, a little REITs, maybe some gold/silver ETFs… Also, as for natural resources, how about some sector-specific funds for natural resources, commodities, and/or energy. Finally, I don’t know if you own a home, but there’s part of your inflation hedge right there. Put a little more into your motgage payments and get a little more equity in your home now that we are, I believe, approaching the bottom of the residential real estate downturn.