If you are so scared of inflation (which is fair, so am I), just buy inflation indexed bonds.
As for crypto, there is no fundamental mechanism that guarantees it will appreciate more than inflation on the long run.
As for crypto, there is no fundamental mechanism that guarantees it will appreciate more than inflation on the long run.
It isn’t that simple. Inflation indexed bonds have a coupon and a factor.
As inflation goes up, the factor goes up. Yay, keeping up with inflation!
But as market interest rates go up, the price of your bond with the lower interest rate goes down. Boo, crippling losses!
Now you can buy Series I Bonds to avoid this interest rate risk (i.e. duration) but you’re limited to $10,000 per year per social security number.
If you’re worried about inflation the best thing to buy is a productive asset. Like stock in a profitable business. That is… until so many people do that it makes every company wildly overpriced.
Wow this stuff is hard.
Not really if you hold them until maturity.
Respectfully, that is just not correct.
Imagine you own $1,000 of a 30 year bond that pays 2% interest.
Interest rates go up to 6%.
You could sell your 2% bond and buy a 6% bond. But everyone else could too. So your 2% bond is worth less.
And you’re going to hold it for 30 years, losing out on market interest. That is, you’re getting 2% when the rest of the market is getting 6%.
The loss is there whether you sell or hold to maturity.
Your only decision is do you want to take your loss now in one big sum or take it in small sums over the next 30 years.
You do know that the official inflation numbers are much lower than actual inflation?
Practically useless. The government only allows each person to buy $10k of I-bonds.
$10K is way more than what most people can save in a year, so it's effectively unlimited for more households.
Quite frankly, a S&P 500 index fund would serve them better than an I-bond, even during severe market drawdowns.
> TIPS principal is adjusted by changes in the consumer price index, either up or down. The interest rate is determined at issue.
https://www.thebalance.com/comparing-tips-to-i-bonds-2388668
Any good?