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January 31, 2012
Salvation from Inflation
 You know about ROI and you’re up on your IRA. But what about CPI? Uh – S.O.S.?
The CPI (Consumer Price Index) measures inflation – and it's good to know when planning your financial future.
Last year’s CPI reading of 2.2 percent is unlikely to climb much higher, according to Emily Sanders, founder and CEO of Sanders Financial Management. And even then, she notes wages had only increased by 1.8 percent.
"Official government CPI statistics exclude [groceries and gas] which are more volatile and prone to rise quickly,” explains Sanders. “When the inflation rate exceeds wage gains, the 'real' gains are negative."
What can we do about it?
Sanders suggests income-generating assets, like stocks, that pay big dividends. “Commodities typically don't produce cash flows of their own,” she says. “Gold is a safe-haven investment during inflationary times – almost an alternative currency.”
Of course, there are investments specifically targeted to offset inflation. They include major private funds like BlackRock’s Inflation-Protected Bond Fund and Vanguard’s Inflation-Protected Securities Fund.
The government also offers Inflation-Protected Securities. In the case of Treasury Inflation-Protected Securities, or TIPS, the principal corresponds with inflation rates so you’re paid interest on the greatest principal.
Sanders calls Seeking Alpha “a good place to start” familiarizing yourself with a range of financial strategies. They aggregate commentary from a wide range of market watchers so you can form your own opinions.
Bonus PINK Link: Do you need an IRA? Find out in our online exclusive.
Do you feel you’re making the right investments in this economy? Take our poll!
By Rachel Pomerance
“Life's under no obligation to give us what we expect.” Margaret Mitchell
*Supporting images from FreeDigitalPhotos.net, Ambro, Tin by dan, and Stuart Miles.
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