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There is no perfect answer, because you can't know in advance exactly how this will all play out. If you could know for certain that inflation would remain ver
by codefreeordie 4y ago
There is no perfect answer, because you can't know in advance exactly how this will all play out.
If you could know for certain that inflation would remain very high for an extended period, you could buy a mixed bag of commodities. Inflation is a generalized increase in prices, and if inflation continues long enough, it would eventually become extremely broad-based, meaning that the cost of ~every useful thing would increase. Commodities are fungible useful things. Gold and silver are popular (personally, I like silver better for reasons that I won't get in to here), but you can also buy even more "useful" commodities -- copper, for example. Or energy in all sorts of forms[1], or certain kinds of foodstuffs Depending on how much financial destruction you think there will be, you can buy physical stuff and hang on to it, or, if you think the systems will mostly survive intact, you could buy long-dated futures contracts for these products.
Make sure you fully understand the contracts you are buying before you actually buy them.
Futures are complex financial instruments, and you can easily lose more than all of your money if you fail to understand what you are buying and make poor choices. (Read up on what happened during the time in 2020 when oil had a negative price. Lots of neophyte investors got really hurt)
I do not specifically advise buying commodities. I don't personally play in the futures market. But, if you wanted to explicitly invest against inflation, that's an approach you can take. Keep in mind, of course, that while stocks are fractional interests in companies, and companies are productive assets -- they make more stuff/value/money over time -- whereas commodities are not productive assets. Over time, your commodity costs money to store, and the amount of stuff doesn't grow. That means that by tying your capital up in physical commodities, you are foregoing the opportunity to own a production stream. If inflation exceeds economic growth, that is likely to be a good bet. If economic growth exceeds inflation, it is likely not to be.
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[1] Keep in mind that some commodities have shelf lives. Some energy commodities have really, really short shelf-lives. Obviously, food commodities have shelf-lives as well.
- morpheos137 4y agoWhat about royalty trust units?