Ask HN: How do you hedge against inflation? | Hacker News Reader

Ask HN: How do you hedge against inflation?

19 pointshubraumhugo15 comments

An individual can buy up to $10,000 in Series I bonds from the U.S. Treasury a year. Their current ARR is 7.12%. That rate expires at the end of the month (April 2022).

https://www.treasurydirect.gov/indiv/research/indepth/ibonds...

Do you know what % of that is fixed vs. the inflation adjusted rate? Also, I was confused by how often the inflation rate adjusts the interest rate.

The fixed rate is 0.00% -- it's all inflation rate. Inflation rate is adjusted every six months.

Here are past fixed rates going back to 1998: https://www.treasurydirect.gov/indiv/research/indepth/ibonds... It hasn't been much above 0% since 2008.

Actually, $15,000/year -- you can buy an additional $5,000 in paper I-bonds with your federal tax refund, and you can arbitrarily overfund your tax payment to be sure to have $5,000 in refund. The paper bonds can be exchanged for electronic I-bonds through a somewhat annoying process.

Do you really need to buy these bonds with payroll deduction?

No.

I got inflation indexed bonds in 2000 around the time they spiked interest rates to kill the bubble.

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

Despite inflation being moderate the whole time these went up in value a lot, more than I expected based on the interest rates.

My broker fired me because I went to a sales presentation and argued with a salesman about I bonds being a good investment relative to the annuities they were pushing.

TIPS might be a good idea now.

Since you mentioned hedging, I'm going to skip over the TIPS/bonds others have mentioned. Those will protect that invested money against inflation but they don't provide any significant returns at current rates, and thus cannot act as a good hedge for your entire (diversified) portfolio.

You could look into industries or sectors that stand to benefit from inflation. I'm not sure if there's a good list of these. I would imagine certain commodities, REITs, materials, or consumer defensive could be good candidates. Companies with a lot of debt that have locked in low interest rates on that debt can also be attractive depending on the other factors in how that debt is structured.

An obvious suggestion for many people is to have a fixed rate mortgage and not pay it off early. Property values have been rising and will likely continue that longterm trend. If I have a 3% mortgage, then inflation last year essentially made me 4.2% since the value that the monetary balance represents has been reduced.

These are just my general thoughts and should not be considered advice. These thoughts might not be applicable to everyone.

Invest money in so called "Inflation Stocks".

These are stocks, which grow in times of Inflation.

It's simple: Just ask yourself, what will rise in price in inflationary years.

- oil, gas, food...

Or go to a stock screening portal, and filter out the best 3 Industries. There, look for the best 1% rated/performing stocks.

Even better, if you are trading stocks, learn the follwoing, and in a view years, you can use the stock market like an ATM: Stan Weinstein, Stage Analysis.

You will not get rich quick, but probably very wealthy in the future.

Hope this helps

become a producer of tangible goods that people need to live.

get skills that most people dont have, but need.

buy productive assets

In the U.S. there exist Treasury Inflation-Protected Securities (TIPS). You could buy STIP, the iShares 0-5 Year TIPS Bond ETF. The UK also has inflation-indexed bonds. Gold is another possible hedge. Maybe oil and gas stocks, since energy prices rise during high inflation.

Is anyone not losing money right now ?

I checked one of my 401ks, and I'm down like 5% this year. Checked some other funds and everything has lost money.

Previously I wanted to buy a home, but I also hate the notion of being trapped in one place

The market as a whole is down. People who picked specific companies or sectors might be up. Although it's likely they wouldn't be well diversified to have avoided the overall market effects. Also, look at your performance over multiple years. Of course pullbacks will happen, but my guess is that you're still 10%+ over the past 2-3 years.

The way interest rates are going, it could be costly to buy a home if you wait. Although jumping into such a hot market isn't great either. Basically, it'll suck either way.

Well, I know a few people who went into inverse index funds (those that move opposite of an index fund) in 2020, thinking that there would be a COVID recession. They were too disgusted to pull that money out, so they're up on the year, but still down since 2020.

Real Estate?

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