This week, we asked the Invstr Community where they would allocate their money during an inflation surge. The poll had a major plurality, with 41 percent of Invstrs allocating their money to cryptocurrency. Cryptos like Bitcoin aren’t affected by inflation because they have a limited supply, unlike the US dollar, so many believe that it works as a hedge against inflation. However, the sample size for this has been the COVID-19 economic recovery, so we aren’t sure if it really works as a hedge, making it a surprising first place vote over some of the other options. In second place is placing your money into stocks, which 30 percent of Invstrs chose. Certain stocks in specific industries can make some gains during an inflation surge. However, most of the market is in a slump whenever inflation arrives as it affects future cash flows, which makes this a very surprising second place vote. Last on the podium is the 15 percent of Invstrs that would invest in real estate. Real estate is often considered an amazing inflation hedge as property values rise when inflation surges. We saw this first-hand with the pandemic and other instances, and the only downside is that real estate is an illiquid asset. With the benefits clearly winning this, it’s surprising that this option wasn’t higher on the list.
For fourth place, we have the 10 percent of Invstrs who would place their money in gold. Gold is one of the most famous inflation hedges as it holds its value against currencies, but people are starting to doubt its effectiveness. Essentially, it is a safe option most of the time, so there are points to argue on both sides for its placement in the poll. The last placer is short term bonds, with 4 percent of Invstrs choosing this for their asset allocation. Short term bonds are considered the best type of bonds to hedge against inflation as the payment of long-term bonds is low when inflation arrives. However, you aren’t gaining in this situation, but instead losing less, which isn’t ideal. This justifies its last place finish, and it closes our poll results this week.
With a possible inflation surge coming in the next few months, you could use these poll results to guide your investments during that time. As investors, it’s important to get ready for what could possibly happen in the future. Post your new investments on the poll, and we will see you next week!
The Invstr Team 🙂