One of the questions that many investors are asking themselves right now is, “How can I protect my purchasing power if we have a period of inflation?” The traditional answer is that equities are the only asset that returns enough over time to offset inflation in any significant way.
However, according to a new study by Attie and Roache excerpted here, it turns out that inflation protection doesn’t work in a simple manner. Some investments are helpful at the onset of inflation, but help less as time goes on, while other asset classes do just the opposite.
Their solution is one that we reached long ago: tactical asset allocation. It’s a systematic way to respond to continual changes in the investing environment and may be the only way that works in the long run.
