Abstract
This column examines inflation risk with strategies for reducing nondiscretionary spending by focusing on such areas as health and wellness, debt reduction/elimination, and investing in housing to lock in significant costs. We also focus on the investment portfolio. Stocks have been a great long-term hedge against inflation, but they do expose investors to short-term volatility. Near-term investments include short maturity Treasury securities that include inflation protected securities (TIPS). A laddered approach to TIPS is ideal, yet building the ladder can be complicated. TIPS funds are much easier to employ; however, they provide less certainty regarding future cash flows. This uncertainty can be managed by periodically calculating the present value of near-term cash flow requirements and then adding to the fund if necessary.