Personal Finance: Ask the Experts

Get advice on money matters from The Bee's Claudia Buck and a panel of local experts

October 4, 2012
How should I protect my money from inflation?

Q: Inflation has been quite low the last several years and many people do not recall the 10%+ inflation during the Nixon/Ford/Carter administrations. If I believe inflation were to rise significantly and be persistent in the future, then where should I invest my cash? CD's, bonds, certain classes of equities, natural resources & commodities, real estate or other types of investment vehicles? Thanks
Mike - El Dorado Hills, CA

A: This is a great question, Mike. Inflation is the hidden evil behind eroded returns, diminished spending power and frustration by those on fixed incomes. As we observe the declining value of the dollar, low interest rate monetary policy and ridiculous government spending - there is no doubt inflation is coming. The question is when. The unfortunate truth is there are few strategies to avoid inflation all together. An investor, however, can reduce the impact of inflation and hedge inflationary risks to his/her portfolio.

Here are a few ideas:

Real estate securities -The properties in a real estate security can hedge high inflation through the increase of rental prices. Longterm leases in sectors like office and retail may have the ability to increase rents with changes in the Consumer Price Index (CPI). Properties with short term leases, like hotels and apartments, can boost rents as leases expire. Real Estate Investment Trusts (REITS) are a great way to gain exposure to this market.

Commodities - The prices of commodities, such as oil, metals and other natural resources, tend to rise much faster during inflationary times. An increase in demand for a finite amount of commodities during inflationary periods further accelerates prices. There are many securities that allow retail investors easier ways to invest in commodities without buying the actual commodities. Commodity stocks may also provide protection. Asking your broker would be a good start.

Treasury Inflation-Protected Securities (TIPS) - These securities are issued by the U.S. Treasury where the principal of a TIPS increases with inflation and decreases with deflation. The correlating measurement is the CPI. TIPS pay interest twice annually, at a fixed rate and are can be purchased directly from the Treasury.

Just remember inflation is a cycle and having a balanced portfolio takes precedent over tactical changes, Mike.

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Meet Our Financial Experts

Claudia Buck

Claudia Buck is The Sacramento Bee's personal finance columnist. Read all her columns here. Contact her at

Terri Carpenter

Terri Carpenter offers advice on job hunting, retraining and career counseling. Carpenter works at Sacramento Works Inc., the career and job training arm of the Sacramento Employment and Training Agency (SETA). With 15 years in the field, she has hands-on experience with everyone from first-time job seekers to career professionals seeking advice after a layoff or looking for a mid-career change. Ask her a question.

Carlena Tapella

Carlena Tapella is a partner in the law firm of Webb & Tapella Law Corp. in Sacramento. The firm specializes in estate planning and probate, such as estates, trusts, conservatorships and litigation. She is a past president of the Sacramento County Bar Association's Estate Planning & Probate Section. Ask her a question.

Kimberly Foss

Kimberly Foss, certified financial planner, is the founder of Empyrion Wealth Management in Roseville. With nearly 30 years in the financial industry, her clients include women in transition, small business owners, retirees and "pre-retirees." Ask her a question.

Jesse Weller

Gregory Burke, a CPA and tax expert with John Waddell & Co. in Sacramento since 1984, worked as an IRS tax auditor for six years. He’s a past chairman of the California Society of CPAs. Ask him a question.

Daniel Tahara

Daniel Tahara takes your questions about California taxes. Tahara, a spokesman for the state Franchise Tax Board, has 10 years of experience as a tax auditor. Ask him a question.

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