How to protect against inflation:
1. Don’t stick cash under a mattress.
2. Avoid long-term bonds (which get killed by inflation).
3. Gold is a great inflation hedge, but is a terrible long-term investment. Other commodities are similar.
4. TIPS (e.g. VISPX) make excellent inflation hedges AND long-term investments.
5. Short-term investments, like money market funds, short-term bonds, and short-term CDs, protect well against anticipated inflation. If people expect 4% inflation, these investments need to pay more than 4% in order to get people’s money.
6. Stocks and real estate protect against inflation over long time periods (5-10 years), but not over short periods.
In other words, most investments do fine with inflation. Physical cash and long-term bonds are the real risks.
