Table Of Content
Inflation reduces purchasing power and raises costs, making it harder to maintain profits or grow wealth.
While some assets increase in value, wages often lag, and essential expenses—like food, energy, and housing—rise faster than income.
As a result, individuals may struggle to save or invest wisely.
How to Make Money During Inflationary Periods
Many assets and income strategies can actually perform well during inflation—if you understand where pricing power and rising demand intersect.
1. Commodities: Real Assets That Rise With Inflation
Commodities tend to increase in price during inflationary cycles because they represent the raw materials that become more expensive to produce and transport. Investors can benefit from this direct price surge.
Tangible Store of Value: Commodities like gold and silver aren’t tied to fiat currency, so they tend to hold or increase their value as inflation erodes the dollar.
Price Pass-Through: When oil, gas, or agricultural goods become more expensive, those costs are passed through the economy, raising the price of these commodities themselves.
Market Demand Surges: During inflation, governments and investors flock to physical assets, creating demand spikes that lift prices further.
Inflation Hedge History: Historically, commodities outperformed many traditional investments in the 1970s and 2021–2022.
Investors can gain exposure to commodities through ETFs such as SPDR Gold Shares (GLD) or Invesco DB Commodity Index (DBC), without holding physical assets.
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How to Invest in Commodities
Investing in commodities during inflation can help preserve purchasing power and diversify your portfolio. Here are the main ways to gain exposure:
ETFs and Mutual Funds: These are the easiest way for most investors, offering exposure to gold, oil, agriculture, or a diversified basket without needing futures contracts.
Futures Contracts: Allow direct exposure to commodity price movements, but carry higher risk and require a brokerage account that supports futures trading.
Physical Commodities: Buying gold or silver bullion gives you tangible assets, ideal for long-term hedging.
Commodity Stocks: Companies in mining, oil, and agriculture often benefit from rising commodity prices.
Investment Option | Type | Focus |
|---|---|---|
SPDR Gold Shares (GLD) | ETF | Physical gold |
Invesco DB Commodity Index (DBC) | ETF | Broad commodities |
Sprott Physical Gold Trust (PHYS) | Physical Fund | Gold bullion |
Barrick Gold Corp (GOLD) | Stock | Gold mining |
2. TIPS: Bonds That Adjust With Inflation
Treasury Inflation-Protected Securities (TIPS) are designed specifically to rise in value with inflation, making them one of the few fixed-income instruments that can protect your purchasing power.
Principal Adjusted to CPI: As the Consumer Price Index rises, your bond’s principal value increases, which means you’ll earn more interest over time.
Preserves Real Returns: Unlike traditional bonds, where inflation can wipe out interest income, TIPS are structured to maintain your buying power.
Safe During Rate Hikes: When central banks raise rates to fight inflation, TIPS still offer increasing income, unlike fixed-rate bonds that may lose value.
Risk Mitigation: Backed by the U.S. Treasury, they’re considered among the safest inflation-resistant investments available.
TIPS can be purchased directly from TreasuryDirect or via inflation-linked ETFs such as iShares TIPS Bond ETF (TIP).
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How to Invest in TIPS
TIPS are designed to help investors preserve purchasing power during inflation by adjusting the bond’s principal with the Consumer Price Index (CPI). You can invest in TIPS through:
Direct Purchase: Buy individual TIPS through TreasuryDirect.gov and hold to maturity.
TIPS ETFs: Funds like iShares TIPS Bond ETF (TIP) or Vanguard Short-Term TIPS ETF (VTIP) offer easy access and liquidity.
TIPS Mutual Funds: Actively managed funds like PIMCO Inflation Response Fund provide diversified exposure with professional management.
Investment Option | Type | Focus |
|---|---|---|
iShares TIPS Bond ETF (TIP) | ETF | Broad TIPS |
Schwab U.S. TIPS ETF (SCHP) | ETF | Broad TIPS |
SPDR Portfolio TIPS ETF (SPIP) | ETF | Intermediate TIPS |
Vanguard Short-Term Inflation-Protected Securities ETF (VTIP) | ETF | Short-term TIPS |
Direct Purchase via TreasuryDirect | Individual Bonds | TIPS |
3. Rental Real Estate: Income That Grows With Inflation
Real estate appreciates over time, and rental income typically increases alongside inflation, offering a rare combination of capital growth and inflation-protected cash flow.
Rents Adjust with CPI: Landlords can raise rent annually to match or outpace inflation, boosting cash flow in high-demand areas.
Property Values Rise: Inflation often drives up construction costs and housing demand, increasing the value of existing properties.
Debt Advantage in Inflation: If you hold a fixed-rate mortgage, your real cost of debt decreases as inflation rises while your rental income grows.
Hard Asset Benefit: Like commodities, real estate is a tangible asset that performs well when fiat currency loses value.
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How to Invest in Rental Real Estate
You don’t need to buy property to invest in real estate—REITs and ETFs give you exposure to rental income and property appreciation with much lower capital requirements.
REITs: Publicly traded companies like Realty Income (O) invest in income-generating properties and pay high dividends.
Real Estate ETFs: Broad funds like Vanguard Real Estate ETF (VNQ) or Schwab U.S. REIT ETF (SCHH) provide exposure to multiple REITs.
Real Estate Mutual Funds: These offer active management and diversification across real estate sectors.
Investment Option | Type | Focus |
|---|---|---|
Vanguard Real Estate ETF (VNQ) | ETF | Broad U.S. REITs |
Realty Income Corp (O) | REIT | Commercial |
Schwab U.S. REIT ETF (SCHH) | ETF | Equity REITs |
iShares U.S. Real Estate ETF (IYR) | ETF | Diversified REITs |
Cohen & Steers REIT & Preferred Income Fund (RNP) | Closed-End Fund | REITs + Preferreds |
4. Dividend-Paying Stocks: Income & Stability During Inflation
Dividend-paying stocks offer consistent income streams that help offset the rising cost of living, and many top companies can increase payouts in step with inflation.
Regular Income: Dividends provide cash flow even when stock prices are volatile or under pressure from inflation-driven interest rate hikes.
Pricing Power Advantage: Many dividend-paying companies operate in essential industries (e.g., healthcare, consumer staples) and can pass higher costs to customers—protecting margins.
Inflation-Linked Dividend Growth: Strong businesses like Coca-Cola and Procter & Gamble have a history of raising dividends annually, often outpacing inflation.
Lower Volatility: Dividend stocks tend to be less volatile than growth stocks, offering a more stable ride during economic uncertainty.
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How to Invest in Dividend-Paying Stocks
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Individual Dividend Stocks: Choose companies with consistent dividend history like Johnson & Johnson (JNJ) or Procter & Gamble (PG).
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Dividend ETFs: Funds like Vanguard Dividend Appreciation ETF (VIG) and Schwab U.S. Dividend Equity ETF (SCHD) offer diversified exposure.
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Dividend Mutual Funds: Actively managed options focus on income growth and value-based stock selection.
Investment Option | Type | Sector |
|---|---|---|
Procter & Gamble (PG) | Stock | Consumer staples |
Johnson & Johnson (JNJ) | Stock | Healthcare |
Coca-Cola (KO) | Stock | Beverages |
Vanguard Dividend Appreciation ETF (VIG) | ETF | U.S. dividend growers |
Schwab U.S. Dividend Equity ETF (SCHD) | ETF | Broad dividend stocks |
Summary: How to Profit from Inflation
Inflation erodes purchasing power, but smart investments can protect your wealth. Commodities, TIPS, real estate funds, and dividend-paying stocks often perform well during inflation.
These assets offer rising income, price appreciation, or inflation-linked returns—helping investors preserve value and generate profits when traditional cash or fixed-income investments fall behind.
FAQ
Investing during inflation can involve higher market volatility and reduced real returns if your assets don’t keep up with rising prices. It's important to focus on inflation-resistant options and avoid cash-heavy or long-term fixed-rate investments.
Yes, inflation can reduce corporate profits, especially if companies lack pricing power. However, sectors like energy, healthcare, and consumer staples often perform better during inflationary periods.
Inflation erodes the purchasing power of cash, meaning your money buys less over time. Keeping too much in a low-interest savings account can lead to real losses.
Gold is often seen as a safe haven, but it doesn’t generate income and can be volatile short-term. It works best as part of a diversified inflation hedge strategy.
Energy, utilities, real estate, and consumer staples often outperform because they either control essential services or pass rising costs to consumers. These sectors can maintain or grow profits in high-inflation environments.
Rising interest rates often accompany inflation and can hurt traditional bonds and growth stocks. However, assets like TIPS, short-duration bonds, and dividend stocks can perform better in rising rate environments.
Some investors view Bitcoin as digital gold due to its limited supply, but it remains highly volatile. It may offer upside but is not a guaranteed inflation hedge.
Value stocks, particularly those with strong cash flow and stable dividends, often perform better than high-growth stocks during inflation. They tend to trade at lower valuations and can better weather economic shifts.
Yes, diversifying into international markets can reduce exposure to U.S.-specific inflation and interest rate policies. However, foreign exchange risks and regional inflation levels should be considered.
Long-term fixed-rate bonds usually lose value during inflation, so shifting to TIPS or short-term bonds can help. It’s more about adjusting the bond type than removing bonds entirely.
Look for assets with pricing power, inflation-linked income, or intrinsic value that rises with demand. Real estate, commodities, and certain stocks often meet these criteria.
