
Ask HN: What’s your go-to investment for protecting cash from inflation? - elamje
I am curious what investments, and why, you all invest in to mitigate cash depreciation. Bonds, CD’s, etc.
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dv_dt
Treasury Inflation-Protected Securities, often called TIPS?

[https://www.treasurydirect.gov/indiv/products/prod_tips_glan...](https://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm)

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deanmoriarty
I don't know... I have the feeling that the inflation rate calculated in those
formulas is much lower than the actual inflation rate experienced by the
population, and it's kept artificially low because otherwise many inflation-
adjusted entitlements paid by the government would grow out of proportion.

Maybe it's just because I live in California, but over the past 10 years I
have observed inflation in my main expense categories (mostly rent and
restaurants) go up a steady ~10% a year, which clearly doesn't match what the
TIPS have been returning, so had I had all my nest egg in TIPS, my purchasing
power would have shrunk by quite a bit.

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okaycan
1) TIPS inflation isn't solely to cover state of California only. It is a
nation-wide average.

2) Your main expense categories are just a subset of consumer expenditure that
the bureau of labor statistics use to measure price levels of goods and
services.[1]

[https://www.bls.gov/news.release/pdf/cesan.pdf](https://www.bls.gov/news.release/pdf/cesan.pdf)

~~~
marketgod
To add to this, your personal inflation rate will be larger because the CPI
takes into consideration a similar item. So when the economy is good, a kraft
dinner is replaced with a steak dinner, when the economy drops, the opposite
is done. So you pay not see the inflation rate change in your daily expenses.

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deanmoriarty
I am surprised nobody mentioned index funds. While more risky, investing in
diversified (including international) equities for the long term is expected
to at least keep up with inflation (minus crazy volatility in the short term)
since you are effectively buying businesses whose value of produced goods and
services should effectively raise along with inflation, unless major
demographic and economic shifts happen (in which case your CDs or bonds would
likely be just as screwed).

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soared
The answer 100% depends on the time frame. If you only want to beat inflation
you probably want the cash in more than 2-3 years but less than 7 years. CDs
are probably good. If you're young enough and can tolerate risk then index
funds are a better choice if you can take losing money for any random period
of time.

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AnimalMuppet
Do CDs beat inflation? At times at least, I think they have failed to do so.
(My dad called them "certificates of depreciation" for a reason.)

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soared
Yeah but not by a whole lot. Inflation last year was 1.8%, this site says 1
year cd gets you about 2.7%. I do remember my dad holding the same opinion so
I wouldn't be surprised if thats historically true.

[https://www.nerdwallet.com/blog/banking/nerdwallets-best-
cd-...](https://www.nerdwallet.com/blog/banking/nerdwallets-best-cd-rates/)

~~~
deanmoriarty
Don't forget taxes. Unless you hold them in a retirement account, interest
income is taxed at your marginal rate, so your 2.7% easily becomes ~1.5% or
less if you are a relatively high earner at the peak of your career.

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WAthrowaway
Self-managed index fund
[https://m1.finance/dey0cfo2f](https://m1.finance/dey0cfo2f)

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w4tson
That’s a neat idea

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pesfandiar
If the goal is to only beat inflation, which most central banks try to keep
around 2%, there are many GIC products where the principal is guaranteed and
the interest is slightly over the usual inflation rate.

I don't personally use GICs though. If you don't need liquidity in the short
term, a balanced portfolio (40% safe, 60% growth) reliably performs much
better in the long run.

~~~
elamje
So is that just a Canadian product something like a CD in the US?

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pesfandiar
Yes. Didn't realize GIC is a Canadian term only. They're almost exactly like
CDs.

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marketgod
Trade options in the stock market. I take losses by holding a lot of cash on
the side but the options market pays well.

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vba
interested to know what people's opinions are on how interested (i.e. CPI) is
calculated today versus how it was calculated pre-1990
[http://www.shadowstats.com/alternate_data/inflation-
charts](http://www.shadowstats.com/alternate_data/inflation-charts)

~~~
simplecomplex
Glancing at the graphs, I thought it was weird his alternate CPI exactly
tracks BoL CPI changes. Turns out it’s because he’s just adding a constant.
From Wikipedia:

> Shadowstats does not actually recalculate BLS data, rather, the Shadowstats
> CPI merely adds a constant to the officially reported numbers

This doesn’t inspire much confidence in his alternate CPI.

MIT’s billion prices project is much more novel and interesting. They track
prices from online goods in real-time to calculate price inflation. You can
see some of the stats posted at
[https://www.pricestats.com](https://www.pricestats.com)

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dyeje
Stocks for inflation, bonds for deflation.

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rygine
based on averages over the last 10 years (simple google search), a high-yield
savings account (HYSA) or CD should mitigate inflation.

you can find HYSAs now that go as high as 2.45% and 12-month CDs around 2.75%.
of course, YMMV. this is not financial advice.

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nik736
IP addresses

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LUmBULtERA
Vanguard's VTSAX long term, VMMXX for short term.

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euphumus
Gold and Silver (or Bitcoin and Litecoin)

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RockIslandLine
Inflation comes from too much money chasing too few goods and services.

So to reduce inflation, the easiest way to remove money from circulation is to
buy Federal government bonds.

The other way to reduce inflation is to create new value among the goods and
services offered in the private sector. What new product or service can you
create?

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soared
Half of your answer to beating inflation (2-3%/yr) is to build a startup?

