In times such as the present when you have a substantial portfolio of stocks can be a stressful experience. The markets for equity have been making new all-time highs but the economic justification for the soaring prices seems rather shaky.

Older people who managed their the money they earned during Black Monday (1987) and the Dot-com bubble (1995-2000) warn of the potential for similar events in the future while at the same time Wall Street encourages retail investors to take on more risk.

Famous investors such as Ray Dalio and Mark Mobius are publicly declaring that investors must be able to have 5-10% of their investable funds held by physical Gold. The Ray Dalio All Weather Portfolio, as an illustration, has the 7.5% allocation to Gold.

The highly successful investors are recommending physical Gold as a hedge against the stock market , while also pointing out the risk of currency devaluations aftermath of massive pandemic related fiscal and monetary stimulus.

In this brief article we'll look at different strategies for protecting an Portfolio of Investments against inflation risk and the stock market.

Recommendations on how to hedge versus rising cost of living

There are many options that are typically thought of as an inflation hedge:

Precious metals (Silver particularly)

Commodities

Real estate investment trusts (REIT)

Treasury Inflation Protected Securities (TIPS)

As with all possible Investments Each one of the asset types has advantages and disadvantages that an investor has to consider.

Precious metals

The https://medium.com/@diontspw482/a-step-by-step-guide-to-gold-as-a-hedge-against-stock-market-8b9102962a3a?source=your_stories_page---------------------------------------- purchase and keeping of physically Gold or Silver can be a time-tested method for hedge against Inflation. Metals that are precious are also an excellent way to diversify an investment portfolio and hedge against risk in the stock market.

In the Great Inflation of the 1970s (1963 until 1980) Gold rose by 1600 per cent and Silver rose by 2700%. Investors with foresight could purchase Silver for $1.29 and gold for $35 an ounce by 1963. In the year 1980, these smart investors could make a profit from their investments at $50 or $800 per one ounce.

The ideal way to invest to invest in Silver and Gold is to get personal ownership of those Precious metals and store them locally.

There is also the possibility to be exposed to the metals using ETFs or Trusts (e.g., GLD), Gold Trusts (e.g. GLD, GLD) as well as SLV Trusts, Silver Trusts (e.g. SLV, for instance) as well as certificates program (e.g., Perth Mint).

Investors who have retirement savings that are tax-deductible can invest in physical Precious metals using these funds by opening a self-directed Gold IRA. Both tax-exempt and tax-deferred Retirement accounts can be moved in Gold IRAs.

Commodities

Commodities represent real investments, such as orange juice and steel that is rolled. When inflation is high, prices on real products tend to rise.

From an Investment perspective There are two types of commodities you need to keep in mind: soft and hard.

Hard commodities must be mined or drilled and this is the case for precious metals, copper, aluminum crude oil, natural gas, and so on.

Soft commodities can be found in the soil or walk over it with four hooves. Corn, wheat live hogs, corn, and feeder cattle are all examples of soft commodities.

ETFs enable investors to make investments in soft commodities.

Commodity futures are not recommended due to the risk of assignment. Options on commodity futures are an option to hedge your stock however they come with the highest risk.

REIT stands for Real Estate Investment Trust (REIT)

REITs are investment vehicles that hold pools of income-producing real Estate. Inflation can push the cost of rental and property values higher.

Investors purchase individual shares of REITs in order to be exposed towards Real Estate without taking on the burden of finding or financing the properties them.

Residential REITs are specialized in housing units, single-family homes, mobile homes, and student housing. Commercial REITs are focused on office buildings, retail stores hotels, and other types of income-producing business property.

A small portion of REITs are focused on the holding of mortgage debt (Mortgage REIT) while the majority of REITs focus on holding properties that generate income (Equity REIT).

Treasury Inflation Protected Securities (TIPS)

TIPS, or Treasury Inflation Protected Securities, offer the security of an Treasury bond with a guarantee that the investor will always get at the very least their initial Investment back.

The principal value of a TIPS bond will be adjusted to match that of the CPI (Consumer Price Index) for the duration that the bond is in force. Annual coupon payments are calculated on the current principal amount of the bond. This means that the investor gets an inflation-adjusted payment for their TIPS.

For an example, consider an investor with $15,000 worth of 5-year TIPS with an interest rate of 1. If Inflation (as measured through CPI) is 4%, then the bond's value CPI) is 4.4%, the $15,000 worth of bonds will be adjusted to $15,600. The bond's coupon is then calculated based on the adjusted value of the principal , meaning that the investor receives $156 interest for the duration of the year.

Notice that the investor's original investment (the primary of the bond) is being adjusted for inflation in this instance, however the investor is locked into a 1% interest rate instrument in an environment in which higher coupon rates are likely to be offered.

For investors who are cautious about risk, the lower return from TIPS might be acceptable in exchange for the sense of security that comes with the US Treasury bond.

The best way to sidestep versus rising prices

We have to be careful when we start talking about the best of anything in the investing world. The best hedge against Inflation is likely to be different for a 25-year old than for a 65-year old.

An investor's tolerance for risk also affects what their ideal Inflation hedge will look like. A risk-averse investor may avoid commodities because of volatility while the risk-tolerant investor loads up on physical Silver and shares of energy ETFs.

Why is Gold a hedge in contrast to rising cost of living

Gold is seen as a hedge against Inflation because the price of Gold increases when the purchasing capacity of the currency which it is priced decreases.

The cost of an gentleman’s costume is provided as the most classic illustration of Gold being used as an instrument to hedge against Inflation.

In 1922, a tailor-made wool suit (a AEURoebespoke suit) along with an additional pair of pants cost about $25 US Dollars, and Gold was priced at $20.67 per ounce.

Fast-forward to today and similar manaEUR(tm)s suit costs $1500 to $2000. Gold selling for approximately $1800 an ounce.

It's been 100 years since just one ounce Gold has shielded its owner from the destruction of Inflation.

Just how to get into Gold

There are numerous ways to invest in Gold. Like we said the most effective Gold Investment involves purchasing the physical metal and keeping it locally where you have easy access to it.

Once the foundation is set and the foundation is set, there are many ways to invest in Gold:

Physical Gold Trusts and ETFs (e.g., Sprott Physical Gold Trust PHYS, or GLD)

Mining stock, warrants and options

Self-directed Precious metals in IRAs (Gold IRAs)

Gold futures

Options on Gold futures

Physical Gold Trust

It is true that the Physical Gold Trusts such as GLD (SPDR Gold Shares Trust) are deceptive since they offer investors the illusion of owning physical Gold however all the investors actually own are shares in a securities that is (supposedly) connected in some way with physical Gold.

It is important to recognize this fact: Gold Trusts are securities, not Gold itself. The Trusts are derivatives from physical Gold but they don't provide an buyer any ownership interest in the actual metal.

The Gold Trust shares can supposedly be redeemed for physical metal, however only investors who have a solid financial foundation can do so.

The Sprott Physical Gold Trust (PHYS) demands that investors redeem their shares in 400oz increments. With Gold at $1780 an ounce that implies that an investor will require 7112,000 dollars worth of PHYS prior to when it's feasible to receive the actual metal.

GLD, which is the SPDR Gold Shares Trust, is a trust with an an even more stringent threshold for the delivery of physical Gold.

Investors who are qualified can redeem up to 100,000 GLD shares at any date and time, and can request delivery of Gold in physical form. For today’s value (01/07/2022) that equates to an investment of around $16.8 million US Dollars.

Self-directed Precious metals IRA

Precious metals IRAs provide investors with a means to establish an Gold hedge in the stock market using Tax-deferred Retirement funds.

Unless an investor is prepared to pay the penalty of 10% for early withdrawal of their tax-deferred and tax-exempt money (401K, 403b Traditional IRA or traditional IRA, etc. ), the money is basically locked in a type of IRS-approved Investment vehicle until the age of 59 and 1/2 .

Gold IRAs fall into the category of Investments that are approved and offer investors the protection and security that comes with physical Gold ownership without paying any taxes or penalties as part of the process.

Final thoughts

In this short piece, we've talked primarily about using Gold to hedge against stock market risks caused by inflation.

Stock Portfolios are exposed to a variety of other risks, including inflation. There is equity risk