With inflation on the rise, investors are looking for the best way to preserve the value of their portfolios in the coming periods. Although inflation is a natural occurrence in the economy, rapidly rising inflation causes uncertainty in the markets and can lead to large price swings and overall volatility. 

Through inflation hedging strategies, investors can discover the best financial instruments to make up for potential losses due to inflation. The good news is that there’s always an opportunity to make money no matter the market conditions, investors just need to be more strategic with their trades and have the right tools and resources at hand to do so.

If you’re hoping to learn what is the best hedge against inflation, you’re in luck – that’s exactly what we’ll cover in this in-depth guide. You’ll also discover the best stocks to hedge against inflation. Before we get into that, let’s start by discussing what exactly an inflation hedge is and why these strategies are so important. 

Inflation Hedging Defined:

Before we start discussing what the best hedge against inflation is, let’s take a look at what an inflation hedge is. We can begin by defining inflation, which is when the general price level of goods and services increases so the buying power of a given currency declines. 

A hedge against inflation, then, is the risk management strategy utilized by investors to offset the negative effects of inflation on their portfolios. And while implementing any sort of hedging strategy is a good idea, there are some investments that offer more advantages than others – which is why we’re going to discuss what is the best hedge against inflation. One more topic before we get into that – why is hedging so important? Continue reading as we discuss why you need to uncover the best investments to hedge against inflation. 

Why You Need To Uncover The Best Investments To Hedge Against Inflation

As an investor, you need a solid grasp of the market forces at play and how they impact your portfolio. Both macro and local trends have the potential to derail your investments. So, it’s important to be prepared by utilizing strategies that can help to preserve their value.

At this point in time, there doesn’t appear to be a clear end in sight to rising inflation in the United States. And while there haven’t been many periods of prolonged inflation in the history of our country, the short-term can still set your portfolio back months – or even years.

Plus, it’s been shown that years with higher rates of inflation saw meaningful stock market gains as well. Although, there are also instances where the major indices suffered during these times. So, investors can’t rely on the fact that their portfolios will soar during inflationary periods – you must stay ahead of the curve by implementing some means of an inflation hedging strategy, especially if recession fears continue to linger. 

Above all, investors need to discover the best investments to hedge against inflation because it’s how they can preserve the value of their assets over the long-term. Then, once market conditions have turned favorable again, they can start to compound on previous returns rather than having to climb out of a hole and recoup their losses. With all of this said, what are the best hedges against inflation that are available to investors today? Let’s get into the main topic you came here for today!

So, What Is The Best Hedge Against Inflation? 4 Investments To Consider Adding To Your Risk Management Strategy

We’ve already covered the details of inflation hedging strategies and discussed why investors need to implement them as inflation rises. Now it’s the moment you’ve been waiting for – we’re going to discuss the best hedges against inflation. Investors looking to implement a risk management strategy in the period ahead have a variety of options when it comes to the best ways to hedge against inflation. Continue reading as we list out what we deem to be the top four approaches – starting with real estate. 

Real Estate

Real Estate can be a great bet for investors during periods of rising inflation. Given that real estate has an intrinsic value and that property values tend to increase as inflation rises, having real estate exposure during these times can be very valuable for investors. 

Plus, there are regular dividends to collect through rent payments, and the demand for housing does not tend to be impacted by macroeconomic conditions. So, as inflation rises and fears of a recession continue to loom, investors can bolster their portfolios by increasing their real estate holdings. An easy and accessible way to invest in real estate without buying properties is to purchase REITs or real estate ETFs on the stock market. These securities are more liquid than physical real estate, so investors can quickly buy and sell them as they wish to execute their inflation hedging strategies. 


Another tool investors have to defend themselves against the negative effects of inflation is to purchase TIPS. While these can’t be purchased on the stock market, investors have long depended on TIPS as anti-inflationary investment vehicles. TIPS, or Treasury inflation-protected securities, are backed by the United States government and designed to increase in value as the inflation rate rises. So, it’s clear how these securities can be valuable to investors to preserve their assets during inflationary periods. Even still, some investors choose to omit TIPS from their inflation hedging strategies because the long maturity dates keep their funds locked up for a significant amount of time. So, given that many inflation hedges are implemented as short-term strategies, the structure of TIPS may not be the best bet for investors, especially where liquidity is concerned. 


One way that investors choose to preserve their capital during inflationary periods is to hold on to cash. Rather than actively participating in the markets, they decide that sitting on the sidelines is a better course of action for them. Most of the time, this means that investors close out their holdings, preferably near a high, and wait for a market correction when there’s a more favorable entry point. This type of inflation hedging strategy can be a safe bet for investors who don’t have access to valuable tools and resources and would rather avoid incurring losses. But, they don’t have the exposure to other securities during this time that can provide them with profitable returns, either. If you’re risk-averse, this is probably the best hedge against inflation for you.


Many experts agree that stocks are the best hedge against inflation. Not only has this been proven true historically during periods of high inflation, but it’s how investors can outpace the rate of inflation during normal conditions. 

For example, until now, the period with the highest rates of inflation in recent times was in 1979-80. Coming in at 11.3% and 13.6%, respectively, inflation was roaring through the country. However, the stock market clocked in very impressive returns during these years, with the S&P 500 gaining 18.5% in 1979 and 31.7% in 1980!

There are many other instances where the overall stock market saw better returns than the inflation rate, and a few where they didn’t, but stocks continue to reign supreme among investors when it comes to the best ways to hedge against inflation. 

With stocks, investors can utilize a number of different strategies including shorting stocks, shorting ETFs, and implementing value investing principles. So taking this into account, you may be wondering what are the best stocks to hedge against inflation with? Keep reading as we discuss the stocks you should look out for when executing your inflation hedging strategy. 

What Are The Best Stocks to Hedge Against Inflation With?

If you want to stick with the stock market to hedge against inflation, you’ll be happy to know there are a number of ways you can make money with stocks as inflation rises. Keep in mind, not all stocks will perform well during inflationary periods, so you’ll need to be strategic about which trades you initiate to stay profitable. Plus, learning how to invest during a recession can be helpful, though there are specific aspects of inflation that call for a distinct strategy. 

So when it comes to the best stocks to hedge against inflation with, many experts will point out that the S&P 500 has generally performed well during inflationary periods. Thus, keeping a diversified holding of the stock market through one of the major indices can help investors stay profitable during these periods. 

Additionally, international stocks can be valuable assets for American investors while inflation runs rampant in the U.S. Major markets like Italy, Australia, and South Korea tend to be independent of the market forces at play domestically and can be a good haven for investors looking to preserve capital during these periods. 

Now – how do you find these stocks to invest in? Of course, you can rely on technical analysis – keeping track of the best indicators will help you uncover opportunities. You can also follow company news to identify new opportunities. However, there is a better way to invest – allow us to introduce you to VectorVest!

To discover individual stocks and other opportunities in the stock market despite unfavorable overall market conditions, you need the help of a stock forecast website. With VectorVest, not only will you gain clear advice on what stocks to buy, when to buy them, and when to sell them but you’ll also be able to utilize our pre-configured searches that pull up winning opportunities on autopilot! Not sure of your next move? Just take a look at our hottest stock picks on any given day and see which picks align with your strategy. 

Our software helps you gain confidence and eliminate the guesswork as an investor. No need to spend hours trying to make sense of charts and graphs. Instead, invest the modern way using our proprietary stock-rating system that simplifies all technical indicators into three metrics: value, safety, and timing. Pick the stock with the highest VST Rating and win more trades – it’s that easy. Check it out today with a free stock analysis tool.

How To Get The Most Out Of Your Hedging Strategy

In addition to learning what the best ways to hedge against inflation are, there are some other tips to keep in mind as you move forward with any of the abovementioned strategies. Let’s take a look at some of the ways you can best execute a profitable inflation hedging strategy. 

Be Realistic With Your Goals

When executing an inflation hedging strategy, the goal may not be to capture maximum gains. Instead, you may be trying to avoid major losses caused by inflation so you don’t have to dig out of a hole once there’s been a market correction. So, keep your expectations reasonable and realize that there are some limits to how much your inflation strategy can accomplish. 

In the end, you’ll be happy that you took the steps to protect the value of your assets against inflation, and don’t have to make up for major losses once inflation rates have abated–even if you didn’t experience major gains during this time. 

Maintain Diversification

Additionally, investors should be aware that executing a short-term inflation hedging strategy could impact the overall diversification of their portfolios. So, they should make sure that they’re maintaining a diversified portfolio that aligns with their long-term goals. This is important because they’ll want to avoid outsized exposure to certain areas that could be potentially risky. 

Be Aware of the Tax Implications

On the same note, an inflation hedging strategy may call for investors to enter and exit a series of short-term positions to best play the markets and execute profitable trades. While this may be beneficial for hedging against inflation, it could make investors liable to capital gains taxes on profitable trades. So, investors need to account for this when pricing out these strategies. 

Final Thoughts On The Best Ways To Hedge Against Inflation

So, now having a clear understanding of what the best investments to hedge against inflation are, you can be better prepared to deal with rising inflation and keep it from being detrimental to your portfolio. Although inflation is a natural occurrence in the economy, there are still ways investors can preserve their capital during these periods and execute profitable trades. If you want to learn more, you can take a look at our article on how to hedge against inflation.

Investors at any level can benefit from investing in quality stock forecasting software to help make quick and informed decisions and accurately time the markets. You don’t have to wait for a market correction to make money in the stock market; rather, with the proper tools at hand, like VectorVest, you can have the clarity to make profitable trades no matter the market conditions.