Prasanna Kumar, Founder and CEO of FinloTax.
Inflation rates have witnessed a steep fall since the Covid-19 pandemic hit, dropping from the highs of 9.1% in 2022 to 2.8% in February 2025. Although the annual inflation rate in February decreased slightly from the 3% reported in January 2025, the Federal Reserve’s target rate of 2% has been unattainable thus far. More importantly, the widespread imposition of tariffs and the consequent price rise are likely to drive inflation figures higher in the months ahead.
Inflation is an inevitable economic reality that erodes your purchasing power over time. Proactive strategic investing is a hedge you can use to combat high inflation.
Investment Strategies To Tackle Inflation
1. Diversify across asset classes.
One of the best ways to tackle rising inflation is to diversify your portfolio of investments. A well-diversified portfolio reduces risk exposure by spreading it across various asset classes and enhancing your resilience. Include a mix of stocks, bonds, real estate and commodities to spread exposure.
2. Invest in government bonds.
Treasury inflation-protected securities (TIPS) are government bonds meant to keep pace with inflation. They help protect your investment by increasing as inflation rises and decreasing once deflation sets in. This is done by adjusting the principal value of these securities based on changes in the consumer price index (CPI).
3. Invest in commodities and precious metals.
Putting your money into commodities and precious metals can be a safe bet during periods of rising inflation. While the currency value falls, the prices of gold, silver and other precious metals tend to rise. Commodities such as oil and grain can also be profitable investments during inflationary times. Take advantage of equity-traded funds or mutual funds for your commodities and precious metal investments.
4. Invest in real estate.
Along with commodities like gold and oil, real estate often performs well during inflationary periods. Besides, real estate investments tend to appreciate over time while also ensuring you have a steady rental income stream.
5. Invest in real estate investment trusts (REITs)
Real estate investment trusts (REITs) are set up by companies that own and operate major real estate holdings. Inflation impacts real estate by increasing rent and property prices. REITs take advantage of inflation to generate profits for the investors. Investing in REITs allows you to invest in real estate without major capital expenditure.
6. Capitalize on stocks paying regular dividends.
Investing in the equity and stocks of companies with a history of paying regular dividends can ensure you have a steady income stream that outpaces inflation. Companies dealing in consumer goods and utilities generally continue paying regular dividends even during volatile inflationary periods, since the increased costs are passed on to the consumers.
7. Consider investing abroad.
Diversifying geographically can also help mitigate the impact of domestic inflation. Inflation rates vary across countries globally, and investing in countries that display strong growth potential could bring in a steady income while also diminishing the impact of domestic inflation on your investments.
Active Portfolio Management
Countering the impact of inflation on your investment portfolio requires regularly reviewing and rebalancing measures to ensure your investments continue to align with your financial goals and risk tolerance. Inflation often leads to fluctuations in the growth of your investments. Rebalancing your portfolio involves moving your investments from nonperforming assets to ones that are performing better. Staying informed about economic trends will help you make the required adjustments to your investment strategy.
While inflation remains a persistent challenge, the right investment strategies will help diminish its impact. Building a resilient portfolio of investments will not only help preserve your wealth but also help it grow. By diversifying your investments and actively managing your portfolio, you can stay ahead of inflation and achieve long-term financial success.
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