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What Inflation-Hedging Investments Do You Recommend?

Question: I’d like to avoid bonds because of their current low yields and interest-rate risk. What are some good, inflation-hedging alternatives to consider?

– Toby Lawson, New York City

Answer: Most financial planners would advise against forgoing bonds completely. But you’re right on one front: If you’re looking for inflation protection, bonds aren’t it, says Paul Baumbach, a financial planner and founder of Mallard Advisors in Newark, Del., with more than $100 million under management. Experts say that even TIPS (Treasury inflation-protected securities), government bonds that adjust the principal to keep up with inflation, aren’t really worth it at today’s high prices. (You can blame overwhelming investor demand.) Historically, in high-inflation environments, stocks have performed the best, says Baumbach; so consider filling that gap with fixed-income instruments that are a bit less “bond-like,” such as high-yield debt—or convertibles, which are bonds that can be converted into common stock.


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    • $2.99 is a good price point. He’ll either have some decnet (general) advice or it will provide a good laugh. A good deal either way.Silver crashed about a month ago. It’s recovering but that seems like a risky thing to be dumping too much money in. If you had followed his advice back when he wrote it (Sept 10) you’d still be sitting pretty. But if you picked his book up back in late April and bought up some silver you’d be crying. You can’t get narrow investment advice from a book (or TV show or blog) and expect it to pan out. Stocks, commodities (pork bellies!) whatever. You’ve got to do the research, diversify.I’d also warn against betting COUNTER to recovery. Definitely look into things that aren’t tied directly to major indexes and currency but beware of over committing to investments that run counter to those things. The entire WORLD is dialed into some kind of recovery being a success. Anything you invest in is going to be priced by a large market of human beings. Each whiff of recovery (real or phantom) will cause a dip in your counter investment. This makes for an extremely volatile investment environment.

    • I didn t win your draw for “When Money Dies”, but bought it ayanwy and found it a very interesting read. It was however a little disconcerting to realise that the draw for the book was part of the pre-marketing of your inflation-linked corporate bond fund. It struck me as quite a jump from today s market environment to a defeated Germany in 1923 and as such had the unpleasant whiff of scare mongering-as I don t think you are suggesting that we are on the precipice of hyperinflation. But if you do think so, I have a couple of questions. Do you really think that an inflation linked rate of interest will protect investors if the currency involved becomes worthless? Do you think you can actually cherry-pick the corporates that will survive a hyperinflation while avoiding the rest. It seems to me that Mr Schacht s solution to hyperinflation was to wipe out all debts and start with a clean slate ..

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