What are the best investments that will offset inflation without going outside your comfort zone?

Answer 1

You have receive several answers suggesting tips and I-bonds. They are indeed inflation adjusted. But if they are not in a Roth IRA account, there is a catch. The inflation adjustment is taxable. For tips you have to pay the tax every year even though you do not receive the inflation adjustment until the bonds come due. I love Uncle Sam. I-bonds are a slightly different story. They are not taxed until cashed in.

If your comfort zone, prohibits you from investing in stocks, you have a problem. Your only alternative is realestate such as rentals for example. They require a good deal of work or hiring a manager to deal with the work.

Stocks are the best long term inflation hedge that I know of that is a passive investment. A mutual fund or and index fund or better yet several will allow you to protect yourself against the ravages of inflation over the long term. It will not be a bump free ride however. Stock investments can go through long period of very poor returns--several years. But still if your stock portfolio is well diversified with holdings in broad different categories and if history is any indication, you should keep well ahead of inflation.

Here is an example of a well diversified holding

45% in overseas mutual funds
10% in China holdings
10% in India holdings
15% in Europe holdings
10% in Japan holdings
55% in U S holdings
15% in large cap holdings
15% in small cap holdings
15% in bank stock holdings (these are among the highest quality stock holdings one can own)
10% in oil stocks

Over the long term such a portfolio should return 10% annually or if inflation become sever inflation + 5%.

There are index funds that one can purchase for each category except India. That category can be covered with a mutual fund or closed end fund.

Why the large foreign holdings? To protect against the value of the dollar and to put your money where future growth appears more assured.

Answer 2

This would depend on your comfort zone.

Usualy in financial planning, investors are sepearted into 4 catogaries.

1. Low Risk
2. Low-Mid Risk
3. Mid - High Risk
4. High Risk Take

Only be going through the proper financial evaluations would you be able to determine which category you are in.

I would draw out an estimated % of investment that the different category of people would be advised to put their money in

1. 100%cash (Fixed Deposits or Principal guarenteed equities)
2. 60% Cash 40% Low risk Equities
3. 20% Cash 40% Low risk Equities 40% High Risk Equities
4. Stocks + Equities with very low % in cash

The percentages are debatable and many different financial planner would have different guidelines depending on which companies that come from and what they specialise in.

Best thing is to look for a financial and draw out your investments
Log term or short term. What investment category do you belong to.

Source:
I am a finance graduate BBBA (RMIT) and is exposed to various investment over the years.

Answer 3

T.I.P.S. Treasury Inflation Protected Securities

Answer 4

just offsetting inflation would be done by putting in Bank as deposits.

Answer 5

Best stocks according to me are : ICICI bank (at lower levels), Tata motors, maruti, ONGC

Answer 6

CD, bond(government bond), TIPS, I-bond
High dividend paying stock

Answer 7

invest in real estate..buy flats and plots..its value never decline.
you can get rents on this..as income.