If the last decade is any indication, investing in material goods like gold and silver could be a good way to beat inflation. Before you run out and start buying up everything you can find with these precious metals, though, let’s take a look at why this strategy works.
What is inflation?
Inflation is a general increase in the price level of goods and services in an economy over a period of time. It is usually measured by the consumer price index (CPI), which tracks changes in the cost of a fixed basket of goods and services.
What does it mean to be inflation-resistant? With inflation, your money doesn’t go as far because prices rise faster than your income. You can combat this by investing in tangible assets or real estate that don’t lose value with inflation—for example, gold or silver bullion will stay valuable even when you’re paying higher prices for food and rent every year. If you want to invest in solid precious metals like gold or silver bars, make sure they are marked with purity levels of at least 99% pure so that their weight matches up with what you paid for them (there may be other types of jewelry that could work too).
What causes inflation?
Inflation is caused when there is too much money in the economy.
It can be caused by:
- Too many goods entering the market, which means demand for those goods decreases and prices fall.
- More people getting jobs, causing more people to spend their paycheck on consumer products and services. This drives up costs as more workers need to be paid, creating inflation.
CPI, or Consumer Price Index
CPI, or Consumer Price Index, is a measure of inflation. It’s “a measure of the average change over time in the prices paid by urban consumers for goods and services.” The Bureau of Labor Statistics (BLS) publishes CPI data on a monthly basis.
The index is based on the purchase patterns of families living in urban areas with relatively high spending levels (for example, an index for urban wage earners and clerical workers). Since it is not based on purchasing patterns of all Americans, it doesn’t necessarily reflect changes in price that may affect you if you live in another region.
How have materials performed over the last 10 years?
You may be wondering how materials have performed over the last 10 years. If you are, we can help. Let’s take a look at the performance of gold, silver, the S&P 500 Index, the Dow Jones Industrial Average, and the Nasdaq Composite Index over that time period:
- Gold has outperformed all four indices that were mentioned above. It had an annualized return of 17 percent between January 2008 and December 2018—almost twice as much as any of these other investments!
- Silver also beat out all four other investments mentioned above. Its annualized return was 13 percent throughout this same time period—which is still higher than any of those other investments by a wide margin!
Investing in Gold or Silver
Gold and silver have always been considered valuable, even if they don’t offer any interest or dividends like other investments. These metals have been used for thousands of years as money because they do not decay easily and cannot be counterfeited (which also makes them good for other purposes besides just investing).
If you buy gold or silver at today’s prices and hold onto it until tomorrow, then sell it at tomorrow’s higher prices then you can make a profit from this investment strategy without needing to spend anything upfront — just some storage space! In fact even though gold has lost value since hitting an all-time high in 2012 due to falling demand for jewelry in India and China combined with rising capitalization rates by central banks worldwide who want more liquidity instead; nevertheless investors still believe these metals will increase in value over time because people want something tangible that they can touch when times get tough instead of relying on intangible assets such as stocks or bonds which may not appreciate immediately but could become profitable later down the road once their value starts trending upwards again after being depressed due to market conditions like recessionary periods where consumers have less disposable income available (like now).
Advantages of Investing in Gold or Silver
Let’s take a look at the advantages of investing in gold or silver.
- Tangibility: Gold and silver are tangible assets that you can hold in your hand. They’re also easy to buy and sell, so you can buy small quantities of the precious metals if you don’t want to make a large investment. You can also store them easily because they don’t lose their value over time like paper investments do. This makes them an ideal choice for people who want to protect their savings from inflation without having to worry about losing any value on their money due to inflation (which is what happens when paper money loses its value).
- History: These two precious metals have been used as currency for centuries and were considered valuable by many civilizations even before paper money was invented! It’s no wonder then why these commodities continue being an excellent investment option today with over 5000 years’ worth of history behind them!
Why are materials a good investment during times of inflation?
There are several reasons why materials are a good investment during times of inflation. First, gold and silver are rare metals that have been used as currency for centuries. They can be converted into cash easily and they will always retain value because they are in limited supply. Second, these metals hold their value better than paper currency during deflationary periods, which we’ve seen recently with the recession and housing crisis of 2008-2009. This means that if you invest in gold or silver now during this period of high inflation, your investment will actually grow in value over time while other investments continue to lose money.
Material goods are historically a great way to beat inflation.
You may be wondering, “Can I beat inflation by investing in material goods?” It turns out that yes, you can. And the best part is that it’s not just a one-time investment—investing in material goods is a good way to protect your money over time (provided you choose the right assets).
A great example of this is gold and silver. These are tangible assets that have historically performed well during periods of high inflation. They’re portable, meaning they won’t rust or corrode like other metals might; they’re also easy to store and trade; as well as being a hedge against currency devaluation because of their relative scarcity and value—these qualities make them a smart choice for investors looking to protect themselves from price increases without needing access to financial markets or complicated investments like stocks or bonds.
If you want to invest in material goods, both gold and silver are great options. They’re commodities that have a history of performing well during times when inflation is high. And while they may not be your first choice for an emergency fund, they can provide some security if you need to cover unexpected expenses.