How to Hedge Against Inflation in Nigeria? Best 7 Strategies
ContentsHow Does Hedging Against Inflation Work?Is Gold a Good Hedge Against Inflation?Asset Classes for Protection Against InflationStart investing from €5Diversify InternationallyTotal market ETFs can balance your portfolioWhat Is Historically the Best Hedge Against Inflation?
Short-term investments include certificates of deposit and money market funds. These are very conservative investment options, providing a lower rate of return than stocks, but are less risky than other options. Creating a diversified portfolio of stocks from other countries can protect investors from the declining purchasing power of money in the US market. Traditionally, investments such as gold and real estate are preferred as a good hedge against inflation. However, some investors still prefer investing in stocks with the hope of offsetting inflation in the long term. As interest rates continue to climb, some investors are considering selling gold, which does not pay interest, to purchase assets that do pay interest.
Another potential inflation hedge is purchasing US Treasury inflation-protected securities, AKA TIPS. Annuities that have an increasing income option that goes up with high inflation are the best hedge against inflation. However, most annuities in Nigeria offer fixed-income opportunities. Treasury Inflation-Protected Securities are the most likely savings bonds to serve as a hedge against inflation. This is because they are designed specifically with inflation in mind.
How Does Hedging Against Inflation Work?
In most cases, this is accomplished by creating an opposite position in the market to compensate for any loss that may have been made in their primary position. Hedging may be thought of in a straightforward manner by comparing it to purchasing an insurance policy. When we speak about hedging against inflation, we are referring to the process of preserving your capital from the depreciating effects of [...]