How to Invest During Times of High Inflation

Does it feel like the price of nearly everything is going up: Gas, home energy, groceries, wood/building materials, etc.? 

Your mind isn’t playing tricks on you. This is the result of inflation and it’s an issue that societies have dealt with for hundreds of years.

In March 2022, the inflation rate hit a 40-year high rising 8.5 percent over the last 12 months. This has many Americans scared that their budgets won’t stretch as far or that they’ll no longer be prepared to retire when they had originally planned.

In this post, I’d like to explain the topic of inflation in more detail and give you some tips on how you can invest to keep inflation from eroding away your money.

What is Inflation?

Inflation is the natural tendency for the price of goods and services to increase over time. As supply and demand fluctuate, the result is that the cost of nearly everything goes up. When this happens, the purchasing power of the dollar is decreased. 

To make a simple example, if you were to bury $1,000 in your backyard and then dig it up 20 years later, that $1,000 would not be able to buy you the same amount of items as it once did. More than likely, the price of nearly everything would have doubled during that time, and so your $1,000 would have the purchasing power of about $500. 

Inflation is tracked by the U.S. Bureau of Labor Statistics using something called the CPI (consumer price index). Anyone can check the latest CPI data by visiting the BLS website and looking at their published information. 

Sometimes, especially during times of war or political conflict, prices have changed more erratically leading to periods of high inflation. The U.S. Federal Reserve is tasked with keeping an eye on the economy and maintaining inflation to a modest 2 percent target per year. 

When inflation is high, the Fed’s main defense will be to raise federal interest rates. In the short term, this can cause the stock market to go down. However, it does help prices to stabilize and produces the desired effect of lower inflation.

How to Invest During Inflation

While inflation is inevitable, the one recourse that people have is to invest. As long as you can get a better long-term rate of return than that of inflation, then your money will technically be growing instead of being eroded away.

Here are some strategies you can use to invest during periods of high inflation.

1. Dividend-Paying Stocks and ETFs

If you want to position yourself for long-term growth but hedge against losses, then a good choice would be dividend-paying stocks. 

Dividend-paying stocks are companies that share a portion of their earnings with the shareholders. This will be a payment that gets issued generally once per quarter. A typical annual dividend yield is about 2 to 3 percent of the share price.

Companies that pay dividends tend to be “value stocks” which are known to be less prone to market fluctuations than growth stocks. Their financial stability plus dividend payments are what make them an ideal choice to weather the effects of inflation.

If you’re not comfortable picking your own stocks, then another option is to buy a bundle of pre-picked stocks using what’s called an ETF (exchange-traded fund). ETFs are similar to mutual funds but can be traded in the open market. They’re very popular on trading apps and often used by robo-advisors.

2. REITs

Another asset class that tends to do fairly well during times of inflation is real estate. This is because properties that are already established with tenants are able to charge more than they were previously. This is especially true of commercial real estate such as apartment complexes, shopping centers, medical facilities, etc.

While you might not be able to buy one of these properties yourself, you do have the opportunity to capitalize on them through what’s called a REIT (real estate investment trust). This is a company that owns and operates income-producing real estate and raises capital from individual investors like yourself.

What’s great about REITs is that they’re required to pay out the majority of their profits to their shareholders through dividends. So similar to dividend-paying stocks and ETFs, REITs can also provide a steady stream of income. 

Depending on the type of REIT you purchase, its share price can fluctuate more than stock. However, REITs also typically pay higher dividend yields, so this can offset your losses over the long term.


If the thought of losing money in the stock market or real estate makes you worried, a “safe” investment to consider is TIPS. 

Treasury Inflation-Protected Securities (or TIPS for short) are U.S. Treasury bonds that are indexed for inflation. These are bonds that pay a small interest rate and also adjust the principal amount to rise with the rate of inflation. By doing this, investors never have to worry about their money being eroded because it’s always consistently rising with inflation.

4. Gold 

Gold is the classic hedge against inflation. Before paper currency was ever even created, investors would look to gold as a way to preserve their fortunes since it has universal value and appeal.

Typically when there’s inflation and the stock market dips, many people will start pouring money into gold for safety. However, gold prices can also fluctuate so investors need to be careful about when they pull their money back out.

5. Cryptocurrencies

Like gold, cryptocurrencies like Bitcoin are beginning to become viewed as an asset for wealth preservation due to their decentralized nature. Investors who stick with well-known coins may see long-term returns that are well beyond the rate of inflation.

Of course, crypto has extreme price volatility. Investors who want to take a more cautious approach can buy stablecoins such as Gemini and receive handsome sums of interest in return.

All of Your Investments in One Place

One of the most frustrating parts about investing is having to log in to several different accounts and check the performance of each one. Wouldn’t it be better if you could just log into one central dashboard and see everything all at once?

This is what you can do with the Buxfer Investments feature. The app can sync with accounts from over 20,000 different institutions and show you a real-time report of your complete portfolio. You can even import data from retirement plans such as your 401k and IRAs.

To find out more about the Buxfer Investments feature, click here.

Image credit: Unsplash

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