How To Make Your Investments Inflation Resistant

In a previous article,

We talked about how inflation is the enemy of wealth building.

In this week’s article, we are going to talk about how inflation impacts investing, the mistakes the ultra-rich don’t make, and how to build inflation-resistant investments.

Let’s get started!

How Does Inflation Impact Investing?

As we talked about here,  high inflation can have a dramatic impact on the choices we make for investing our money.

For more than a decade, inflation has been at a slow simmer (~2% per year) which is a sign of a healthy economy. However, the U.S. economy has been at a rigorous boil for the past several months stemming largely from the pandemic. Prices caused by inflation have recently climbed 8.6% which is the highest price spike since 1990 and well above the Federal Reserve’s long-term inflation goal of 2%. This is a problem.

How To Make Investments Inflation Resistant

Here is where Economics 101, Finance 101, and Psychology 101 all merge together. When prices go up for a long time, consumer anticipate that prices will continue to increase for the foreseeable future. This causes people to buy more goods and services today because they think it is cheaper to do now than in the future.

All of this buying causes demand to exceed supply which further pushes up prices. Over time, the effects of inflation can be a self-fulfilling prophecy.

Enter the Federal Reserve whose job is to keep inflation in check. One of their biggest levers to pull to fight inflation are interest rates. By raising interest rates, it causes money borrowing to be more expensive. This, in turn, lowers demand for goods and services and eventually lowers prices and the inflation rate.

Why do we need to understand this? Because inflation can impact our investing strategy and the investment choices we make. Inflation impacts investing in a few ways

First off, the impact of inflation on investments is dependent upon the investment type. For investments with a set annual return and set cash flows (i.e., think savings accounts, bonds, or certificates of deposit – CD for short), inflation can hurt performance since you get paid the same interest rate and same amount of earnings each year. Since that rate was set in a low inflation period, odds are that the interest rate earned doesn’t exceed inflation which means you lose money. For example, if inflation is 6% and your bonds earn a yield of 2%, you lose money.

For stocks, inflation can have a mixed impact depending on the performance of the company behind it. Companies could be selling more which helps the share price. However, companies could also be paying more for wages and raw materials which hurts the share price. A company’s performance in a high inflation environment has a lot to do with how efficient a company is.

On the flip side, precious metals like gold, tend to do well when inflation is high and do poorly when inflation is low. As the value of the dollar goes down, it costs more dollars to buy the same amount of gold.

In high inflation environments, assets with adjustable rates and cash flows (i.e., think rental income property) tend to perform better with rising inflation.

To earn money in a high inflation environment, your investments earning rate must beat inflation. The higher the inflation rate is, the harder it is to outperform it. Plain and simple. To beat inflation, it may cause you to change your long-term investing strategy. What is working for you today may not work for you tomorrow and beyond.

But wait, there is hope. The rich and ultra-rich has been beating inflation for years. To learn how to do it, let’s look at the mistakes these people DO NOT make.

Mistakes the Ultra-Wealthy Do Not Make

In the words of Warren Buffet, the Number 1 rule of investing is to not lose money.

The ultra-wealthy, those who have a net worth of at least $30M, have mastered this rule. It only makes sense to learn from them and how they invest. Many people think that the key to becoming ultra-wealthy is some secret formula passed down from 1 generation to another or is kept in a secret vault only known to “the select few”.

How To Make Investments Inflation Resistant

The ultra-wealthy understand the importance of savings, investing basics, and how to manage risk.

Here are a few popular things that the ultra-wealthy do that the general population does not do.

Do Not Keep Up With The Jones’s

The ultra-wealthy do not compare themselves to others or attempt to keep up with their neighbors. They form a strategy, apply discipline, and measure results. They work on optimizing their strategy until they achieve the desired results.

It’s like going to the gym, watching the powerlifters benching 400lbs. and squatting 650 lbs., and thinking you must do the same to get respect at the gym. That is just not the case. Each person has their own ambitions, strengths, weaknesses, and attributes that make you special from everyone else. The trick is to figure out what works for you and stick to it.

Likewise, many smaller investors look at what their peers are doing and try to beat them. The ultra-rich do not do that. They compare their results against their personal investment goals / long-term investment strategies and use that as the measuring stick of success.

The ultra-rich envision what their life will be like 20 years from now and build their plan to achieve that vision. They stay the course no matter the market conditions. They don’t buy a Mercedes or a vacation home in St. Kitts just because their neighbor does. Instead, they invest the money to compound their returns until they’ve reached their desired wealth level. THEN they cash out and buy some toys! 😊

Understand The Basics

The ultra-rich understand financial basics and have spent a lot of time educating themselves on financial fundamentals.

Here are a few fundamentals they understand:

Focus Investments On Global Markets

The ultra-rich look beyond the U.S. markets to find opportunities in frontier or emerging markets. Some of the top countries that the ultra-wealthy are investing in is China, Indonesia, Singapore, and Chile. As an investor you should always do your personal research before venturing into any endeavor, it’s just that the ultra-wealthy have a head start on you! No big deal, you just need to educate yourself too and figure out what is right for you and your investment strategy.

Invest In Tangible Assets

When people think of investing, they typically think of the Big 3 that financial advisors steer them towards: stock, bonds, and index funds. While these are some of the most common types of investments, it doesn’t mean that these are the best or most suitable for your investing strategy.

Ultra-rich individuals understand the value of physical assets and they allocate money accordingly. Physical assets are a great way to diversify your portfolio. Some of the more popular physical assets the ultra-rich invest in are income-producing real estate (private and commercial), precious metals, land, businesses, and even artwork.

On top of physical assets, the ultra-rich also own assets that are not easy to sell or liquidate. The reason for this is that illiquid assets do not correlate to the stock market, aren’t susceptible to market swings, and protect themselves from a stock market crash.

Invest in Private Markets

The ultra-wealthy understand that great wealth can be generated from private businesses often thru angel investing or direct business ownership. Also top endowment funds, such as the Yale Endowment Fund, use private equity investments to enhance returns and protect against stock market swings.

Understand That Saving Is As Important As Investing

Investing is essential to becoming ultra-wealthy. However, many people forget the importance of a savings strategy. The ultra-wealthy do not. They understand the dual strategy importance of investing wisely and having savings discipline.

The ultra-rich focus on increasing cash inflows (increase what comes in) and reducing cash outflows (decrease what goes out) which enhance their savings and provides the foundation of their investing strategy. While it may not be obvious to think of the ultra-wealthy as savers, it is a vital part of their plan that provides the fuel needed for investing.

The main question we need to now ask ourselves is how can we use this information to build investments that are inflation resistant?….. that is the focus of our next section.

What Investments Beat Inflation?


Investing in the stock market is one way to potentially beat inflation. Unfortunately, you cannot just invest in any stock and hope for success. You need a strategy. For example, smaller companies going thru a growth phase are usually better suited to invest in during rates of low inflation. During rates of high inflation, people tend to lean towards large blue-chip companies with pricing power that pay a dividend (Think Apple, Visa, and Dividend Aristocrat – type companies).

Inflation Resistant Investments

If invested wisely, you can beat inflation. If not sure in which type of companies to invest, you can’t go wrong with investing in an index fund of blue-chip companies such as the S&P 500 index. For example and adjusting for inflation, investing in an S&P 500 index fund has averaged 6% from 1930 thru 2020.

What was the historical inflation rate during this same time period?……… 3.22%. ‘nuff said! 😊

Treasury Inflation-Protected Security (TIPS)

Treasury Inflation-Protected Securities (TIPS) are a special class of U.S Treasury Bonds that are specifically designed to protect investors from inflation. TIPS automatically adjust the value of your investment based on changes to the Consumer Price Index (CPI). This means that the value of the bond rises with inflation and can pay interest over the 5, 10, or 30-year life of the bond.

Precious Metals

Many investors use precious metals, especially gold and silver, as a hedge against inflation. In fact, it has been shown by Daniel Amerman, a certified financial analyst, noted author of several finance/ economics books, and blogger (see, that there is a contrarian relationship between stocks and gold. In the chart below from his website, it shows how periods of high inflation and uncertainty appear to be a boon to owners of precious metals like gold, while periods of stability and certainty seems to favor stocks. He argues that knowing this cycle and when it pivots could be a key to financial success. Check out the links I attached to read more.

How Gold Fights Inflation

For example, the 1970’s was a period of high inflation and as a result gold outperformed stocks by a landslide. During the 80’s and 90’s when inflation rates were decreasing, stocks totally dominated gold. Then from 2000 thru 2012 which included the Great Recession, gold dominated again. Finally, from 2012 to 2019, stocks were dominate again.

Are we in the midst of seeing the start of a cycle of gold dominating over stocks? Only time will tell.

Real Estate

Using real estate to diversify your investments can be a great shield against inflation. This is because real estate has a positive relationship with inflation (does well in high inflation periods) and negative correlation with stocks (stocks go down, real estate goes up and vice versa).

Why is that?

Real estate has 2 components attractive to investors: cash flow in the form of monthly rent and appreciation which allows the investment to grow in value.

During times of inflation, property owners tend to increase rent payments since the cost of goods and services also rise. Inflation also tends to inflate real estate properties, so your value also increases.

Here is another bonus to real estate: From 1920 – 2021, except for the Great Recession of 2008 & 2009), real estate prices consistently increased. Can the Great Recession occur again? Yes.

Based on historical information, is it probable? Not likely.

A major drawback getting involved with real estate used to be that you needed a high down payment on a property to purchase it. This tied up money in the property and made it not available for investing.

Not anymore.

With the growing popularity in crowdfunding, there are several online forums such as Fundrise, Yieldstreet, and Roofstock to name a few that allow you to get started in real estate with a low initial investment. In some cases, it is as low as $500 to get started and allows you to add periodic deposits to your balance.

Investing in real estate has never been easier but don’t take my word for it… check out the links I’ve attached and see for yourself.


More and more, cryptocurrency investing is becoming an alternative to gold for both combatting inflation and hedging against the stock market. In fact, the ultra-rich have been doubling their investments into cryptocurrency for the past year.

One of the main advantages to investing in cryptocurrency is that it is de-centralized and not dependent on market conditions.

For example, Bitcoin has been described as “digital gold” and may be able to protect against inflation due to its limited supply. However, it is not yet known if it is a good hedge against inflation and needs to be approached with caution.

Investing in cryptocurrency is not just for the ultra-rich. Everyday investors can purchase a whole digital currency or even invest in fractional shares thru various finance apps like Coinbase (the most popular for beginners), Robinhood, PayPal, and several others. Even personal finance provider, SoFi, allows crypto trading thru its app.

Check it out and leave me your comments here.


Is this inflation spike temporary or will it be around for the long-term? Only time will tell.

How Investments Can Fight Inflation

In the meantime, protecting yourself from inflation can not only help your investments but also protect you against running short of money in your golden years.

If you want the same results as others, do what they do. However, if you want superior results, sometimes you need to take the road less travelled. Something to think about.

Until next time……..

Live The Life You Love, Want, And Deserve