With the U.S. inflation rate at the highest it’s been in 40 years at over 8%, Americans are worried about their diminishing purchasing power and businesses are trying to figure out how to deal with the uncertainty.
Inflation numbers are an indication of how high prices will go. For example, the current inflation rate of 8.26% means that prices will double in 8.7 years.
What can you do to hedge off inflation and ensure you can afford the higher cost of living?
Some investors tout that investing in gold is the way to go while more recent advice guides investors toward Bitcoin and other cryptocurrencies. Which one is the better choice?
Are you debating whether to invest in gold or Bitcoin? Keep reading to learn the things that will help you compare these investment options and choose the best one for you.
What is an Inflation Hedge?
When you make a plan to hedge against inflation, it means that you’re making an investment that offsets something else like the rising prices of goods and services.
Gold is often the choice of investors to protect their purchasing power. As cryptocurrency grows in popularity, it’s a rival for gold as the traditional way to handle an economic downturn.
Gold vs. Bitcoin
Gold has traditionally been a low-risk investment so investors usually hold a portion of their portfolios in precious metals like silver and gold. When stocks start trending downward, gold acts as a hedge against losses.
Much like gold, Bitcoin’s value comes from its limited supply and growing demand. Both Bitcoin and gold are easy to purchase and sell off because there are markets for both. One of the benefits of investing in gold though is the more established ways to trade it.
Which one you choose to invest in depends on your risk tolerance and your investment goals. Thinking about buying gold? Follow the link for a simple way to invest and put your gold purchases on autopilot.
Historical Perspective
Gold has long demonstrated its ability to hedge off inflation. We haven’t had inflation like we’re experiencing now since Bitcoin came on the scene. That means there’s no data to back it up.
That doesn’t mean though that it doesn’t have the potential to protect you from the government’s money printing that’s been going on over the past decade plus. Remember Bitcoin has a finite supply like gold and is a little bit easier to afford than gold for the average American.
Gold or Bitcoin: Where Will You Invest?
Depending on what your goal is, the debate on buying gold or Bitcoin can have a logical answer. Gold is better as a hedge against inflation and Bitcoin is much more volatile. Speak with a financial investor to help you figure out what the right investment strategy is for you.
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