Kavan Choksi Sheds Light on Some of the Best Investments to Beat Inflation

Investing in assets with returns that outpace the rate of inflation would be one of the simplest yet efficient ways to beat inflation. According to Kavan Choksi, it would be smart for people to invest in diversified index funds on the basis of broad market indexes like the S&P 500, rather than holding on to cash. Such an approach allows people to diversify and grow their portfolio while also lowering the overall risk of loss due to inflation.

Kavan Choksi Discusses A Few Of the Best Investments to Beat Inflation

Even though no one can always accurately predict future market trends, long-term and smart investing in specific assets would be a good way to stave off inflation. Gold is known to be among the oldest hedge against inflation. In fact, it has seen an average annual gain of 9.48% over the span of two decades, between September 2001 and September 2021. Inflation averaged 2.4% over the same period, providing investors with a 7.08% rate of return.

It is important to remember that if one does invest in physical gold, they also has to bear the additional expenses associated with storing and insuring coins and bullion. These costs can eat into the returns. Hence, it would be a smarter choice to invest in gold-focused mutual funds and exchange-traded funds (ETFs) that can reduce these expenses to a good extent. 

Investing in a diversified portfolio of stocks is also a good way to fend off inflation. Between July 2012 and July 2022, the S&P 500 delivered an average annualized return of nearly 11% with dividends reinvested. Adjusted for inflation, this equates to approximately 8.3% in average annual returns. Rather than having to do heavy research on individual stocks that have benefited from this kind of historic growth, it would be better to get started by choosing an S&P 500 index fund or S&P 500 ETF that can track the return of the index and keep costs low. As they typically contain hundreds of stocks, ETFs are able to provide simple, low-cost diversification.

In the opinion of Kavan Choksi, a large number of inflation-averse investors often turn to real estate for the purpose of hedging their holdings. Based on the local market conditions, owning single-family homes can provide a hedge against inflation. To avoid big buy-ins and maintenance expenses, it would also be a good choice to invest in real estate investment trusts (REITs). They provide regular investors with a simple tool to diversify their portfolios and get the inflation hedging benefits of real estate. Investing in REITs essentially involves buying a fund that exclusively owns real estate assets. Regulations require them to pay out regular dividends, and therefore would be particularly appealing to income investors.

Treasury Inflation-Protected Securities (TIPS) are one of the most popular financial tools that can help protect investments from rising prices. The United States. Treasury adjusts the par value of TIPS each year in order to keep up with inflation. This helps boost the interest payments of the investors. TIPS may also deliver some additional appreciation from inflation adjustments.