How do you make money during inflation

For investors, one of the biggest fears today is inflation — a period of rising prices. Inflation erodes the buying power of your money at home and abroad. In a worst-case scenario, it can result in hyperinflation, when a wheelbarrow of bills won't buy a loaf of bread. Right now, inflation is deader than an army of zombies. But massive government borrowing raises the fear that inflation will rise from the grave and eat your savings. But you can fight back — with five inflation-fighting investments.

The consumer price index, the government's main gauge of inflation, has actually fallen 0. A big drop in energy prices was behind much of the drop. And in March, prices of food, housing, clothing and transportation fell. It's no wonder that the government is more worried about deflation — a period of falling prices — rather than inflation.

In a deflationary period, falling prices drive companies out of business, debts become progressively more onerous, and consumers put off buying because they figure prices will always be lower later. To get a true inflationary spiral, you need low unemployment and soaring salaries, neither of which is happening today.

The unemployment rate stands at a recessionary 8. Even if inflation isn't a problem now, however, the massive government debt is one very good reason to fear inflation in the long term. Furthermore, the government's efforts to prop up the banking system will add billions more to the total. The root cause of inflation is too much money chasing too few goods and services. Rather than pay off the debt, the government will simply print more money, and that's inflationary. In the short term, then, inflation isn't a big problem.

As time goes on and the deficit rises, however, inflation could become an enormous problem. Normally, the Federal Reserve fights inflation by raising short-term interest rates, which is devastating to both stocks and bonds. Rising rates hurt corporate earnings by increasing borrowing costs. And bond prices fall when interest rates rise. But some types of assets do rise in value in inflationary times. So if you're worried about inflation, you can make a few moves now to lessen inflation's bite with inflation-beating investments: Treasury Inflation-Protected Securities, gold, commodities, real estate and money market mutual funds.

Treasury Inflation-Protected Securities, or TIPS, are long-term IOUs issued by the government. Like other Treasury securities, TIPS pay a fixed rate of interest until they mature.

Unlike other Treasury securities, however, TIPS have an inflation kicker: The government adjusts the principal of TIPS up or down every month according to inflation.

The yield on year TIPS reflects Wall Street's belief that inflation is no danger: It implies an inflation rate of about 1. If traders are wrong, TIPS could be a bargain now.

In addition, the government uses the consumer price index as its inflation measure — a figure that includes energy. If the price of oil were to surge, TIPS would benefit. Paper money may lose its value, but gold is always worth something. The price of gold isn't tied terribly tightly to inflation. On the other hand, gold has doubled the past five years, a period of tame inflation. Gold prices move opposite the value of the U.

But if inflation does roar, the value of the dollar will fall, too.

Inflation is rising: where should you put your money?

After all, if a dollar buys less at home, it will be worth less how do you make money during inflation. Take possession of the coins.

Scammers love to pretend to store them for you. Each share equals one-tenth of an ounce american funds simple ira investment options gold, minus the fund's expenses.

Inflation is, by definition, a period of rising prices — not just for gold, but for virtually all basic materials, such as steel, coal, oil and lead. Clearly, buying a boxcar full of coal has its drawbacks. And small investors who invest in commodities via the futures markets lose early and often. But you can invest in commodities via exchange traded funds. These funds typically track a commodity futures index, such as the Goldman Sachs Excess Return index, which tracks 24 commodities.

Be aware that many commodity funds have big weightings in energy — which is fine, if that's what you want. Two funds that have consistently beaten their peers are Vanguard Energy VGENX and ICON Energy ICENX. Bucharest stock exchange trading calendar you own a home, you probably have plenty of real estate.

Despite the dismal state of the real estate market, however, your home can be a significant inflation hedge in the future. Home prices — absent a bubble — mirror the consumer price index fairly faithfully. Is this stock market rally sustainable if you have a low-rate, year, fixed mortgage, your note will become a thing of beauty as prices rise.

Your home value will rise, your salary will rise, but your mortgage payment won't. In addition, you'll repay the loan with cheaper dollars. Interest rates tend to rise at the end of an inflationary period, squeezing new home buyers out of the market — and forcing prices down. Real estate funds invest in real estate investment trusts, orREITs, which have had the paint peeled from them in the past few months.

REITs invest in commercial real estate, and that market is starting to crumble. Strictly speaking, a money fund doesn't fight inflation. But over time, money fund yields tend to keep up with inflation, and that's important. In an inflationary period, the last thing you want is an investment whose yield is fixed — such as a fixed-rate annuity or a bank CD.

Your interest payments will buy less each passing month. Money funds, which invest in short-term, high-quality IOUs, can't guarantee a set yield.

They can only give you what the short-term money market has to offer. But as the Fed begins to fight inflation by raising interest rates, your fund's yield will rise, too. You won't get rich, but at least you'll keep up. You can buy three-month Treasury bills directly from the government at www. At today's rates, you need to keep all the yield you can. John Waggoner is a personal finance columnist for USA TODAY. His Investing column appears Fridays.

Click here for an index of Investing columns. His e-mail is jwaggoner usatoday. Search How do I find it? Home News Travel Money Sports Life Tech Weather.

John Waggoner Your Portfolio Mutual Fund Screener Calculators Free Annual Reports. We all have our little fears: The frayed wire on the coffee maker. That knocking noise from the left-rear tire. The zombies staggering around in the backyard.

How I Use Inflation to Get Richer

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