6 ms·

So what's the solution to shield my money from this insane level of inflation? Is there something I can do?

by belval 5y ago

redmen 5y ago
Diversify slowly for the next time around. Or go all in on Alibaba
KarlKemp 5y ago
Spend it to make your life more energy efficient.
daxelrod 5y ago
Series I savings bonds are designed to track inflation. https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm https://www.treasurydirect.gov/indiv/research/indepth/ibonds... . I only recently became aware of them and I am not qualified to give financial advice, so I have no idea if they actually accomplish this well.
- UncleOxidant 5y ago
  They're doing pretty well at this point as they're paying 7.12%. Likely at the rate reset in May they'll pay that much or more for the next 6 months. Only downside is you can only put in $10k/year. If you have a spouse then you can put in $20K/year. Another nice thing about them is that the interest is state-tax free so if you live in a state with income tax it's an added bonus.
  - twblalock 5y ago
    The other big downside is you can't get the money out for one year. After that, they are basically liquid.
    - UncleOxidant 5y ago
      Not a huge downside, really. CDs are similar.
- driverdan 5y ago
  Except they're not a good investment. They pay inflation. So they're approximately equal to a 0% return. Better than keeping money under the mattress but not if you want your money to grow.
  - twblalock 5y ago
    The OP asked how to shield money from inflation, and I-bonds are a good shield.
UncleOxidant 5y ago
Buy iBonds which are currently paying 7.12% and will likely be paying that much or higher at the rate reset in May. Only problem is you can only buy $10K/year. If you have a spouse they can buy another $10k. We maxed out our ibond buying last year and this year.
skeeter2020 5y ago
this is my concern; I've saved my entire life and I'm not seeing corresponding interest rate increases. The only thing I see is a sucker in the mirror who's getting screwed by what started as "quantitive easing" and is now all-out "finance the present and let the kids figure out the solution".
dangrossman 5y ago
Wish I knew too. Do you put it in savings, where the inflation erodes away its purchasing power? Do you put it in the stock market, where raising interest rates could precipitate a crash that wipes out much of your portfolio? Do you put it in real estate, but possibly end up buying at the top of an asset bubble there? There seems to be no safe answer. If you have six or seven figures in assets, the $10K/year limit on inflation-protected bonds doesn't help you. I'm about 33/33/33 cash, stocks and real estate right now. Stuff that feels like it should be an inflation hedge, like commodity ETFs, aren't actually performing well. I haven't found any good advice from family, friends, or the internet in the past few years. It makes me think nobody else knows how to safeguard their savings these days either.
- orbifold 5y ago
  Gold seems like one obvious answer. The other could be crypto.
- stevenhuang 5y ago
  Re stock market, at least there are many neutral-bearish options strategies. They come with other risks of course and you sort of need to know what you're doing, but the concepts are not difficult. Currently I have a bunch of QQQ credit call spreads, and much of my long share losses have been tempered by selling ATM calls.
  - boppo1 5y ago
    What do you do for a living, and how did you learn about options? Do you do any risk management?
    - stevenhuang 5y ago
      Software in non-financial field, investing is just something I find interest in so I have found it easy to absorb knowledge through various means (misc books, forums, etc). And yes, risk management is the name of the game, especially when it comes to options. Basically comes down to trade size (don't have say more than 5% acc size in one position) and being aware of your risks (how many "deltas" you have on, etc). The best way to learn is do. Trade with small amounts to understand your trading platform, identify a strategy you're comfortable with & stick to it, learn from your mistakes. tastytrades youtube playlist on selling options (theta gang strategies) is a good start and I found it helpful in the beginning to learn concepts.
legitster 5y ago
Take on debt.
- UncleOxidant 5y ago
  That can be a reasonable strategy if you're sure you'll be able to service that debt and if you can take on the debt before the interest rates go up significantly. There will likely be a nasty recession coming which is why you want to make sure you're in a position to service the debt even if you were to lose your job. Also, you'll probably want to keep some of your powder dry so that if 30 year TBills start paying, say, 7% or more that you're in a position to buy some of those. People who bought 30 year TBills in the early 80s when they were paying in the mid-teens did really well. Maybe we'll see that kind of opportunity again.
nikanj 5y ago
Spend it on something that has value regardless of economy at large, i.e. shelter / a vehicle / etc.
gregwebs 5y ago
You can spend it now on things that reduce your costs in the future (dry goods, energy efficiency). You can take on fixed rate debt at an interest rate lower than inflation (a home mortgage). If you want to store your wealth: The suggestion for I bonds is the safest approach, but you can only put a limited amount in, and you will still lose a little: most experts believe that government inflation numbers under-represent inflation (the debate is by how much, if you buy an I bond you hope just a little). Otherwise, investors look for "hard assets". A hard asset will maintain its value, going up in nominal dollar terms when the dollar loses its value. This is a reason why real estate has gone up so much recently (and gone up historically). Most investments appreciate with inflation. Stocks however risk a rapid negative response to the current market conditions because they have already priced in the value of monetary policy being loose and it is currently tightening to counter inflation (this is more true of growth stocks). Similarly these aren't good conditions for most bonds. Commodities and gold historically have done much better in high inflation conditions. Gold is a very simple way to replace a depreciating currency with hard money, but commodities may have better tail winds in our supply constrained environment. Bitcoin is a digital hard asset that deserves mention for investing with a speculative amount of money due to additional risks.
- senectus1 5y ago
  >Bitcoin is a digital hard asset that deserves mention for investing with a speculative amount of money due to additional risks. Watching how BTC matches the Bond market in a downward trajectory... I dont think its the same sort of asset as gold. it has no intrinsic strength.
sudden_dystopia 5y ago
Precious metals and maybe Bitcoin. Maybe stockpile some cash/crypto to buy a bunch of stocks at the bottom of the market. Assuming there is a market left whenever this all “ends” :)
- Ekaros 5y ago
  I don't think crypto has yet been proven to be hedge against other assets... From what I have heard it seems to more or less correlate with the stocks.
reducesuffering 5y ago
The global stock market is currently at 18 P/E, which means barring any growth, it's an investment that returns 5.5% while keeping up with inflation long term. Right now, that's an expected 14% nominal and 5.5% real return (and there will be some growth over the medium and long term). In addition, moving up major purchases (housing, cars, appliances, long lasting commodities like toiletries) will retain value with inflation, instead of being eroded at -8% real from savings accounts.

So what's the solution to shield my money from this insane level of inflation? Is there something I can do?

by belval 5y ago

So what's the solution to shield my money from this insane level of inflation? Is there something I can do?

redmen 5y ago

Diversify slowly for the next time around. Or go all in on Alibaba

KarlKemp 5y ago

Spend it to make your life more energy efficient.

daxelrod 5y ago

Series I savings bonds are designed to track inflation. https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm https://www.treasurydirect.gov/indiv/research/indepth/ibonds... . I only recently became aware of them and I am not qualified to give financial advice, so I have no idea if they actually accomplish this well.

UncleOxidant 5y ago
They're doing pretty well at this point as they're paying 7.12%. Likely at the rate reset in May they'll pay that much or more for the next 6 months. Only downside is you can only put in $10k/year. If you have a spouse then you can put in $20K/year. Another nice thing about them is that the interest is state-tax free so if you live in a state with income tax it's an added bonus.
- twblalock 5y ago
  The other big downside is you can't get the money out for one year. After that, they are basically liquid.
  - UncleOxidant 5y ago
    Not a huge downside, really. CDs are similar.
driverdan 5y ago
Except they're not a good investment. They pay inflation. So they're approximately equal to a 0% return. Better than keeping money under the mattress but not if you want your money to grow.
- twblalock 5y ago
  The OP asked how to shield money from inflation, and I-bonds are a good shield.

UncleOxidant 5y ago

Buy iBonds which are currently paying 7.12% and will likely be paying that much or higher at the rate reset in May. Only problem is you can only buy $10K/year. If you have a spouse they can buy another $10k. We maxed out our ibond buying last year and this year.

skeeter2020 5y ago

this is my concern; I've saved my entire life and I'm not seeing corresponding interest rate increases. The only thing I see is a sucker in the mirror who's getting screwed by what started as "quantitive easing" and is now all-out "finance the present and let the kids figure out the solution".

dangrossman 5y ago

Wish I knew too. Do you put it in savings, where the inflation erodes away its purchasing power? Do you put it in the stock market, where raising interest rates could precipitate a crash that wipes out much of your portfolio? Do you put it in real estate, but possibly end up buying at the top of an asset bubble there? There seems to be no safe answer. If you have six or seven figures in assets, the $10K/year limit on inflation-protected bonds doesn't help you. I'm about 33/33/33 cash, stocks and real estate right now. Stuff that feels like it should be an inflation hedge, like commodity ETFs, aren't actually performing well. I haven't found any good advice from family, friends, or the internet in the past few years. It makes me think nobody else knows how to safeguard their savings these days either.

orbifold 5y ago
Gold seems like one obvious answer. The other could be crypto.
stevenhuang 5y ago
Re stock market, at least there are many neutral-bearish options strategies. They come with other risks of course and you sort of need to know what you're doing, but the concepts are not difficult. Currently I have a bunch of QQQ credit call spreads, and much of my long share losses have been tempered by selling ATM calls.
- boppo1 5y ago
  What do you do for a living, and how did you learn about options? Do you do any risk management?
  - stevenhuang 5y ago
    Software in non-financial field, investing is just something I find interest in so I have found it easy to absorb knowledge through various means (misc books, forums, etc). And yes, risk management is the name of the game, especially when it comes to options. Basically comes down to trade size (don't have say more than 5% acc size in one position) and being aware of your risks (how many "deltas" you have on, etc). The best way to learn is do. Trade with small amounts to understand your trading platform, identify a strategy you're comfortable with & stick to it, learn from your mistakes. tastytrades youtube playlist on selling options (theta gang strategies) is a good start and I found it helpful in the beginning to learn concepts.

legitster 5y ago

Take on debt.

UncleOxidant 5y ago
That can be a reasonable strategy if you're sure you'll be able to service that debt and if you can take on the debt before the interest rates go up significantly. There will likely be a nasty recession coming which is why you want to make sure you're in a position to service the debt even if you were to lose your job. Also, you'll probably want to keep some of your powder dry so that if 30 year TBills start paying, say, 7% or more that you're in a position to buy some of those. People who bought 30 year TBills in the early 80s when they were paying in the mid-teens did really well. Maybe we'll see that kind of opportunity again.

nikanj 5y ago

Spend it on something that has value regardless of economy at large, i.e. shelter / a vehicle / etc.

gregwebs 5y ago

You can spend it now on things that reduce your costs in the future (dry goods, energy efficiency). You can take on fixed rate debt at an interest rate lower than inflation (a home mortgage). If you want to store your wealth: The suggestion for I bonds is the safest approach, but you can only put a limited amount in, and you will still lose a little: most experts believe that government inflation numbers under-represent inflation (the debate is by how much, if you buy an I bond you hope just a little). Otherwise, investors look for "hard assets". A hard asset will maintain its value, going up in nominal dollar terms when the dollar loses its value. This is a reason why real estate has gone up so much recently (and gone up historically). Most investments appreciate with inflation. Stocks however risk a rapid negative response to the current market conditions because they have already priced in the value of monetary policy being loose and it is currently tightening to counter inflation (this is more true of growth stocks). Similarly these aren't good conditions for most bonds. Commodities and gold historically have done much better in high inflation conditions. Gold is a very simple way to replace a depreciating currency with hard money, but commodities may have better tail winds in our supply constrained environment. Bitcoin is a digital hard asset that deserves mention for investing with a speculative amount of money due to additional risks.

senectus1 5y ago
>Bitcoin is a digital hard asset that deserves mention for investing with a speculative amount of money due to additional risks. Watching how BTC matches the Bond market in a downward trajectory... I dont think its the same sort of asset as gold. it has no intrinsic strength.

sudden_dystopia 5y ago

Precious metals and maybe Bitcoin. Maybe stockpile some cash/crypto to buy a bunch of stocks at the bottom of the market. Assuming there is a market left whenever this all “ends” :)

Ekaros 5y ago
I don't think crypto has yet been proven to be hedge against other assets... From what I have heard it seems to more or less correlate with the stocks.

reducesuffering 5y ago

The global stock market is currently at 18 P/E, which means barring any growth, it's an investment that returns 5.5% while keeping up with inflation long term. Right now, that's an expected 14% nominal and 5.5% real return (and there will be some growth over the medium and long term). In addition, moving up major purchases (housing, cars, appliances, long lasting commodities like toiletries) will retain value with inflation, instead of being eroded at -8% real from savings accounts.