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Comment by Flatcircle | Hacker News Reader

What’s the best way to protect your money and your young kids savings account from inflation?

[“As someone who made money off GameStop, Dogecoin, and a lottery ticket this year, the best financial advice I can give you is to just be a f-ing idiot.”](https://www.instagram.com/p/COdE0p1Lh6H/?utm_source=ig_embed...)

Is there a non instagram link for this?

I can't view it without being logged in.

I don't know about the best way, but one way to protect against inflation, without concerning yourself with outpacing it, is to purchase TIPS.

https://www.treasurydirect.gov/indiv/products/prod_tips_glan...

Bear in mind that TIPS can go negative too: https://www.thebalance.com/why-are-tips-yields-negative-4168...

This means you will still lose money relative to inflation, just with tigher bounds.

While it certainly provides some hedge inflation adjusted bonds don't seem that helpful when the government can pick and choose what's in the basket of goods the government uses to calculate inflation to get the number it wants.

That’s putting a lot of faith on the gov’t to correctly report CPI, when they have every incentive to underreport it.

In fact, they’ve changed the CPI methodology twice in order to report lower average inflation (under the premise that the old measures “overstated” inflation).

>In fact, they’ve changed the CPI methodology twice in order to report lower average inflation (under the premise that the old measures “overstated” inflation).

Source?

There are numerous. Google search “hedonic adjustment CPI”

On the surface the adjustments seem pretty reasonable to me. As a thought experiment, would you want to live in the 70s just to earn 5x more? I wouldn't. https://www.youtube.com/watch?v=3dL5G4QYEhc

As a software engineer, I think I'd take that deal.

It'd be nice to be able to afford a home in Vancouver.

Plus no smart phones, good riddance.

https://www.investopedia.com/articles/07/consumerpriceindex....

>Over the years, the methodology used to calculate the CPI has undergone numerous revisions. According to the BLS, the changes removed biases that caused the CPI to overstate the inflation rate. The new methodology takes into account changes in the quality of goods and substitution. Substitution, the change in purchases by consumers in response to price changes, changes the relative weighting of the goods in the basket.2 The overall result tends to be a lower CPI. However, critics view the methodological changes and the switch from a COGI to a COLI as a purposeful manipulation that allows the U.S. government to report a lower CPI.

But adjusting the basket totally makes sense from a reporting point of view. Consider the reverse. As countries have gotten richer/industrialized, so have their consumption of meats. If a country is undergoing development, should their CPI basket continue to assume that people eat meat once a week, even though most people eat meat multiple times per week?

> the gov’t

Can you please define what/who you mean by "the government"? The CPI changed in the 1990s after a Senate Finance Committee report said it was over-estimated (i.e., too high):

* https://en.wikipedia.org/wiki/Boskin_Commission

* https://en.wikipedia.org/wiki/United_States_Consumer_Price_I...

If you don't like how BLS (Executive Branch) reports the CPI, perhaps talk to the Senate (Legislative Branch)?

IMHO this is one of the worst ways to deal with inflation. As I understand it, bond yield rates rise with inflation and so a current low interest yielding bond will drop in value when higher yielding coupons hit the market. But I’m not an expert.

Buy the most expensive house/s you can get a mortgage for. Put the rest of your savings into a mix of equities.

What about keeping your primary residence's mortgage to something low enough that you could reasonably cover with an easily obtainable emergency fund. Then include unimproved (or improved) land with no buildings on them in your asset mix. The main thing that increases with housing is the land that the house sits on. With no house, you can hold the land without any maintenance costs. Unimproved land has lower taxes. Of course, in this case you are using land as a store of value. What is better is an asset that returns value without having to sell off pieces of it. So land with a rent-able building on it can be both a store of value and a true investment (that returns monthly dividends). But it also comes with upkeep costs and risk.

Almost impossible to get a mortgage for unimproved land.

This works until the interest rates rise resulting in falling house prices and possible negative equity.

To a point, stocks and other liquid dollar-denominated assets.

After that point, who knows. Precious metals? Depends on how bad things get.

The biggest winners in hyper-inflation are those holding the biggest debts

Don't store wealth in USD. Store it in scarce things.

It would be better if you invested it in a way that made scarce things less scarce.

Buy a house? Or I suppose any appreciating assets.

Houses and land don't really appreciate unless there's some factor constraining supply in the face of stable high demand for example waterfront property within reasonable distance of major cities, land in a city that's full of morons who vote for regressive policies that limit development, the land has an industrial facility on it that couldn't be built today but is grandfathered in, etc. etc.

Also, housing is highly inflated right now. By buying you're buying into a bubble and betting that the inflation will outrun the pop.

I think it's less "things that appreciate" than "things you buy at today's prices and pay for over the next 30 years" that makes real estate attractive when there's inflation.

They do during inflation. Inflation is just dollars being worth less so any asset with value (typically ones that appreciate) will increase roughly in track with inflation. So the value stays the same but the number of dollars go up.

This is separate from housing prices being higher and in a bubble, etx

Housing is madness right now.

I’m in a neighborhood under construction. It cost about $5xxk to build one a year and a half ago. One of those homes went on the market this weekend for $750k. One day bidding war and it sold for $820k.

I have no idea what to make of this

I don't know who or how they have enough money.

Free money from next to nothing interest rates?

You still need enough cash flow to qualify...

For an 850K home at 15% down which is 127K, you need to have about 170K saved to comfortably buy the home. Even on a relatively modest tech industry salary or with a 2-income household at a salary of 60K (120K joint) without children this is a very attainable amount of savings over say 5 years. Obviously not everyone makes this much money but it is an attainable amount, But just realize that almost nobody buys for cash and buyers are usually saddled with the debt for the rest of their lives. This is how home buying has worked in high income areas for 30 years at least.

Last year within 5 months a house sold for 750,000 USD more then it was bought for adding 60% to its price. Housing is broken in a lot of places atm.

Gold.

Put it in index funds. If possible, put it in tax-advantaged accounts.

This is the only correct answer. The only strategy that works though tough times is diversification and holding. With low-cost ETFs and municipal funds that pay tax free dividends, there is enough to be safe and smart. People recommending bonds, gold, penny stocks, and now crypto are the same armchair investors I've been hearing squwak useless tips from the sidelines for almost four decade.

So selling stocks in order to have more cash in anticipation of a market correction is the wrong strategy??

You don’t want cash during inflation. You want hard assets. Precious metals and real estate.

When do you know that the market correction has happened?

> in anticipation of a market correction is the wrong strategy

You still don't quite get it: you're playing the market with this statement. Unless you're a "Big Swinging Dick" (the Salomon Brother's term in Liar's Poker for people that did a million or more a day, which is peanuts today) or on the NYSE trade-floor it ain't gonna happen. The vast majority of people I've known who believed this failed to anticipate and should have just held. But don't let me stop you, go right ahead and gamble away.

Sitting on the sidelines is a good way to lose money:

* https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...

The (US) market goes up around 70% of the time, so by being in cash you're missing a rising tide. Every day/week/month/quarter you're not in the market is a time period that you'll have to Buy High/er (instead of Buy Low/er) eventually compared to jumping in and staying in earlier.

If you want, you can perhaps hold 20% bonds to (a) reduce volatility and (b) have something you can liquidate generate cash to Buy Low on the dip.

There isn’t one.

The government decided to loot the middle class and hand it to the elite, with trillions stolen in the past year.

Your children’s future was destroyed using the COVID lockdown as a pretense for the theft.

At this point, the only fix is wiping out a lot of current, ill-gotten wealth/debt.

bitcoin

Have you compared the change between Bitcoin and Ethereum in the past 12 months?

I actively trade these assets, what are you trying to say? Are you talking about relative outperformance?

It probably won't be popular here, but allocating a small % to Bitcoin. And assets, stocks, real estate.

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