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Military Finances 301: Investing in Times of High Inflation Thumbnail

Military Finances 301: Investing in Times of High Inflation


I work from home. When I eat my lunch, I put the TV on a certain news network. Before I've been listening for 10 minutes, some older actor (many times standing in front of some retired military hardware, like a battleship or WWII bomber) will come on and tell me that high inflation is on the horizon. He then tells me that is why he's investing in gold. But is that a good idea?

The Data Doesn't Necessarily Support Investing in Gold

I recently read an article at Of Dollars and Data that casts some doubt on the idea that gold is the best inflation hedge. The author runs through some different charts and graphs that demonstrate the following.

When inflation exceeds 4% gold isn't the best investment. In fact, it's not even in the top 5. During those time periods real estate held in REITs beat inflation by 6%. International stock funds outperformed the US inflation rate by 2% and the S&P 500 returned 1% more than the inflation rate. U.S. home prices (your house) increased at the same rate as inflation during those time periods. 3-month T-bills lagged inflation by 0.5% and then we finally get to gold which got trounced by inflation by 1.5%.

What to Make of It?

I'm not suggesting that you take all your funds and invest in REITs or even a combination of REITs, International stock and the S&P 500. I still think a broadly diversified portfolio (that could include gold and other commodities) is the best option. Let's face it, we don't really have any clue how things will really play out.

Some suggest Crypto as an inflation hedge. We'll see. This is the first time we've seen high inflation since Crypto became popular.

Military Finances are Different

While inflation hits all Americans, most Americans don't have access to an inflation-adjusted pension that you've earned if you stuck around for 20+ years or you will earn if you make it to 20. And that benefit changes concerns about inflation considerably. The financial advisor down the street may not even know that you have a pension and that it is inflation-adjusted. That's why we think you should work with a Financial Planner or Advisor that deals with military finances each and every day. If you'd like to chat with us about how we do that, give us a call or use the button below to schedule a free initial consultation.

If you found this article useful, you might like the following blog posts:

Military Finances 101: It's Not Just What You Own, It's Where You Own It

Military Finances 101: Liquidity Risk

Military Finances 101: What are REITs and how do they work?

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