I am thinking about a strategic (6 - 12 months) inflation Hedge. My portfolio is VT, employer company stock, BTC , gambling stocks.
I am now thinking about if there is good way to hedge for Inflation (I am working on the semicon industry and prices are sky rocking and lead times are super long.)
I am basically looking for the VT of commodities. I am looking into the following ETFs:
- REMX (could also be a longer play)
- XDWM (seems rather correlated to equities and not liquid, yet interesting companies)
- Copper (no idea how to get exposure. ETF with futures are not offering the best return)
- Gold (not really a big fan but hey… It’s cheap)
- reduce US exposure (shift to east asia and europe)
One more thing: I assume Inflation will drive up interest rates which in return will increase the DCF discount rates. So, intrinsic value of growth stocks will fall resulting in less growth of QQQ stocks. QYLD could be in interesting option here as it yields ~11%.
what are you plays? Any thoughts?
My inflation hedge is my Bitcoin portfolio.
My main inflation hedge is a well differentiated stock portfolio.
On the long term it should work just fine.
I’ve been considering a small allocation in real estate funds to hedge specifically for rent increase, but it won’t make a big difference anyway.
Are we talking domestic or US inflation?
The US fed rates are low partly because they need to sustain their debt level, governement and corporate. The SNB rates are low because they’re trying to keep the CHF from rising, to support our exports. The Fed rates will probably rise before the SNB ones doe (because the SNB policy is in reaction to low rates elsewhere in the world).
I don’t forsee meaningful inflation in Switzerland in the coming years (if we exclude health insurance premiums and real estate from the basket). I’m asking the question because CHF would probably be a good edge against an inflation in the US.
As for domestic inflation, my first line of defense is my salary so the asset I’m investing in is my skillset. Then you’d have;
stocks (companies’ earnings should rise with inflation. If you’re worried about the US, you may tilt away from them, I’m no specialist of the topic.)
real estate (with mortgage(s) because debt is in nominal CHF that would loose value during inflation). Bonus points for a nice little piece of garden somewhere close enough from home.
commodities (nice if you have access to dedicated ETFs at your broker, otherwise, you can also stockpile consumables if you have the storage room - digging into debt to finance future consumption would be an inflation edge).
potentially cryptocurrencies (they could act as a refuge against fiat loosing its value but could just as well be dropping from their peak just as people start needing the money and try to sell their coins).
I’m still betting on the USD loosing value, the CHF staying strong and little to no domestic inflation so my play is skillset + bags of rice/pasta/cans/spices + my own garden, which is not specifically inflation oriented but rather my run-of-the-mill standard doomsday state of preparedness. Small physical ingots of gold, silver and copper wouldn’t hurt but I haven’t set that into motion yet.
Edit: for homeowners: solar pannels and investments meant to improve the thermal efficiency of the building would be edges against a rise in the prices of energy. I’d do it first since there are programs subsidising it and they may not be there forever.
Larry Swedroe has put together some data-driven thoughts about assets that may protect against inflation:
My key takeaway is that I am starting a stamps collection and building a wine cellar. Jokes aside, if paired with proper education on the topic, the wine cellar could be an actual good and interesting investment/activity once FIREd (or just when having more time).