It can be difficult to know where to invest your money during rampant inflation. You want to ensure that your money is safe and will grow, but with inflationary pressures, this cannot be easy.
While the advice of many here on Hive will be to invest your money in cryptocurrency, you only have to look at the top ten on coinmarketcap.com to see that cryptocurrency isn't quite at the stage in its life where it is the inflation hedge it was marketed as in the wake of the 2008 Global Financial Crisis.
To understand why Bitcoin and other coins don't suffer at the hands of money printing inflation, you have to understand there is more than one type of inflation.
While increasing the money supply did have an impact on inflation we see globally, you probably didn't notice inflation was creeping up around 2021 primarily due to supply-chain issues, China's COVID-zero policy that saw factories and ports shutdown combined with material shortages (and subsequent increases), people spending their money on renovations instead of holidays. The price of everything went up because of supply issues mostly.
This type of inflation we are seeing almost everywhere is called cost-push inflation. It's driven by labour shortages, material shortages and the increasing inputs that go into making a product. The price of gas alone has skyrocketed, but diesel prices have also dramatically increased. The cost of doing business has increased, then passed on to consumers.
The funny thing about cost-push inflation is before the pandemic; it was considered a rare type of inflation.
And, when Russia unjustly attacked Ukraine, we saw another notch in the inflation belt.
Two of Ukraine's biggest exports are iron and steel, followed by cereals and other goods. But then you have Russia. Russia exports more than just gas and oil. They are the second largest exporter of cobalt (a key element in rechargeable batteries) and the second largest supplier of vanadium used in energy storage and steelmaking. Russia exports numerous other elements, such as; gold, nickel, platinum, tungsten and other crucial elements/metals.
If you had the knowledge we have now before the invasion, you would have invested in metals such as cobalt because of the unprecedented returns you would have received. But hindsight is a wonderful and cruel thing. It's too late to invest in these things now.
If you are in it for the long haul, the world is your oyster for investing. You could invest in cryptocurrency if you're willing to wait, considering only investing in Bitcoin.
With inflation going up, so too are interest rates. This means that after record periods of low rates and nil returns on savings, banks are starting to offer competitive savings accounts again. Now, the risk of keeping your money in a bank is if the bank collapses (a la GFC), you could risk losing your money. Although, many countries like Australia will guarantee your money, usually to the tune of $250,000.
The upside of keeping your money in a savings account is that you can access it when needed. A family emergency, an emergency at home, sick pet. But the gains are much slower if you put small amounts into your account. Although, after seeing Bitcoin drop 40% in value in June 2022, who knows right now what the better return is?
One thing is for sure, as interest rates increase in the US, the US Dollar is often seen as a safe haven for investors. The strength of the USD is negatively impacting other countries. Until something better comes along, the USD is the currency of trade, and the currency of oil and other commodities are traded.
I know how people feel about fiat here, but even having your money liquid can make for incredible opportunities. A strong USD is a huge opportunity as currencies like the Euro are crushed beneath the almighty US Dollar.
The truth is right now, the best investment you can make is not to spend your money at all. Inflation means everything costs more; your dollars are worth less. The comforting thought is inflation won't always be this high. We'll see around 2024, the inflation rate starts to normalise, and those dollars you didn't spend on inflated goods will be worth so much more.