The continued rise in prices throughout the global economy has left the average consumer reeling and the average investor uneasy. But there are a few tools for investors to combat inflation, so to the extent you can take advantage of them, it’s probably a good idea to do so.
For almost any economic environment, there is a way to combat the apparent headwinds. Inflation is no doubt a major challenge for nearly all investors. So it is even more imperative to be clear on the levers we have at our disposal to at least keep pace in the long run.
1. Look into I-bonds
Inflation-adjusted savings bonds, or “I-bonds,” have been largely irrelevant over the past decade, but are a useful tool in combating inflation. This is because I-bonds pay a rate of interest with two components: A fixed interest rate and an adjustable inflation rate. For the entirety of the 2010s, both interest rates and inflation rates had been abnormally low, so there wasn’t much reason for an ordinary investor to buy I-bonds.
Since inflation has now reached levels not seen in 40 years – with the last reading at 8.6% – I-bonds can now find a role in most portfolios. I-bonds currently pay 9.62%, though that rate is subject to change at least once a year. You’ll also lose the last three months of interest if you redeem the bond before five years, and you’re only able to buy $10,000 worth annually. Still, guaranteed interest above the current rate of inflation is something worth considering in this economic…
