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Real estate

The Case-Shiller U.S. National Home Price index, which tracks the price of single-family homes in nine U.S. Census divisions, has outpaced inflation almost every year since 2012 and is up 8.6% over the last five years. In just the year between September 2020 and September 2021, it rose 18.6%.

If we look at the median sale price of all homes, values have risen far faster than inflation since 1970.

Real estate can also generate passive income through rents, which often rise with inflation. Rents jumped 8.3% year-over-year in the first quarter of 2023 — though the rent rate increase is expected to slow to 5.7% by the first quarter of 2024, according to the Federal Reserve Bank of Dallas.

And while sky-high home prices and rising mortgage rates might make homeownership seem like an investment reserved only for the rich, these days, new investment platforms allow regular investors to get their hands on prime real estate properties.

Some platforms even make it possible to own shares of institutional-quality properties leased by brands like CVS, Kroger and Walmart — and collect stable grocery store-anchored income on a quarterly basis.

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Commodities

As with land, commodities — which include raw materials, precious metals, agricultural products and livestock — are in finite supply, which means that when more dollars chase them (think of gold, for example), prices will rise.

To demonstrate this, Yang cites a 2021 paper that shows, during inflationary periods, precious metals returned 11% on average, with gold returning 13%. In fact, all commodities had positive returns during inflationary periods, the study found.

However, one drawback to investing in precious metals is the cost of storage and insurance. If you’re interested in investing in gold, you might consider alternatives that save you from worrying about insurance.

Stocks

The S&P 500 has averaged an annual return after inflation (with dividends reinvested) of nearly 6.2% since 1960, according to Official Data, which is higher than the average annual inflation rate during that same period. It’s crucial to note that over shorter periods of time, the value may fluctuate and even drop. But remember that all short-term losses are only on paper so long as you don't sell your investments.

Investors like Warren Buffett tend to pick individual dividend-paying stocks. Yang says an easier strategy is just to invest in an S&P 500 exchange traded fund (ETF) or index fund, which tracks the exchange’s overall value.

And you don’t need to have thousands to get started. In fact, using some investing platforms, you can now turn your spare change from daily purchases that would otherwise just sit in your bank account into a diversified portfolio.

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Collectibles

Collectibles such as coins, stamps, table-top game cards and sports memorabilia may not be entirely practical in terms of tracking financial performance. But they can be effective stores of value, Yang says. Collectibles, as with real estate and commodities, are finite in nature. Some collectibles may be so finite as to be one of a kind.

But collectibles aren’t liquid and not all of them outpace inflation.

Businesses

Yang's fifth asset for outpacing inflation is to own a business or a piece of one.

"Businesses are great uses of cash since they produce revenue and cash flow," he said, adding that one of the best parts of owning a business is control over setting prices.

Likewise, “defensive companies” in sectors such as utilities, health care and consumer staples can hold up well or even excel during down markets because the demand for these products does not fluctuate over time.

Making your money grow

While the above assets can all generate higher long-term returns than cash, it's important to remember that they all come with risk. In any given year, your real estate or stocks could decline in value, while the stated value in your checking account will always stay the same. Regardless, keep enough cash around to cover everyday and emergency expenses.

And, sometimes, even that cash can be put to work, for example in a high-yield savings account as opposed to a tradtional savings account. Just make sure your financial institution is FDIC insured to protect your savings against a bank failure.

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Coryanne Hicks Freelance Contributor

Coryanne is an investing and finance writer whose work appears in Moneywise, U.S. News and World Report, Kiplinger, USA Today and Forbes Advisor, among other publications.

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