3 Strategies to Build Wealth During High Inflation

High inflation doesn’t just raise prices at the store. It can also erode the purchasing power of cash, bonds and fixed-income streams, too. This means a portfolio can post a positive return on paper, and still lose ground in reality. The right response isn’t to panic or abandon a long-term strategy, however. Instead, it may help to reallocate toward assets with a track record of outpacing inflation. Here are three strategies to consider.

A fiduciary financial advisor can help you identify which of these strategies may fit your timeline, risk tolerance and goals.

Why High Inflation Threatens Wealth, and What Real Returns Actually Mean

High inflation erodes the purchasing power of money that’s sitting still. That’s why cash can lose some of its value compared to inflation. Suppose we have $100,000 held in cash, with inflation running at 3%. After 10 years, you’d need approximately $134,392 to purchase the same amount of goods and services the original $100,000 would buy. ¹

Cash and low-yield bonds pay a fixed rate that doesn’t adjust as prices rise. This means investors holding large cash positions or long-duration nominal bonds effectively lose purchasing power every year. The Bureau of Labor Statistics reported inflation at 4.2% for the 12 months ending May 2026. ² This marks the fastest pace in three years. And passive investors may be losing ground without realizing it, just because headline index returns look solid.

Strategy 1: Invest in Treasury Inflation-Protected Securities (TIPS) and I Bonds

TIPS are U.S. government bonds whose principal adjusts with the Consumer Price Index. This means both the principal and the resulting interest payment rise with inflation. I Bonds pair a fixed rate with a variable inflation component that resets every six months. Bonds issued from May through October 2026 carry a composite rate of 4.26%. ³ That rate is built on a 0.90% fixed rate locked in for the life of the bond. The inflation portion adjusts automatically. TIPS can be bought directly through TreasuryDirect.gov or through brokerage accounts and ETFs. You can purchase I Bonds directly through TreasuryDirect.gov, subject to a $10,000 annual limit per person.

An investor who bought $10,000 in I Bonds locked in a 0.90% fixed rate plus the inflation component. So if inflation averages 4% over the life of the bond, the real return is roughly 0.90% above inflation, which beats a savings account paying 3%.

TIPS can be richly priced when inflation expectations are already elevated, limiting upside. Both the interest and inflation adjustments are taxable as ordinary income at the federal level, though they are exempt from state tax. I Bonds can’t be redeemed within the first 12 months, and carry a three-month interest penalty for redemptions before five years.

Strategy 2: Own Real Assets (Real Estate and Commodities)

Tangible assets tied to physical goods and property tend to rise with the general price level. Property values and rents increase as construction costs and land prices rise, and commodity prices climb because the raw material inputs for nearly everything become more expensive during inflation.

• Direct rental property: Rents typically rise with inflation, while a fixed-rate mortgage effectively becomes cheaper in real terms, as the balance is repaid in dollars worth less over time.
• REITs: The Vanguard Real Estate ETF (VNQ) offers diversified, passive exposure to commercial and residential property and must distribute at least 90% of taxable income to shareholders, creating an income stream that can grow with rents.
• Commodities: Broad exposure is available through ETFs, such as those that track energy, metals and agricultural products; gold may be appropriate as portfolio insurance rather than a primary growth holding, since it can underperform for years and generates no income.

The SPDR S&P Metals and Mining ETF (XME) returned about 13% during the highly inflationary environment of 2022, compared to roughly -18% for the S&P 500 in the same year, illustrating how commodity-linked equities can behave very differently from the broader market under elevated inflation. ⁴

Just keep in mind that commodities are highly volatile and subject to supply shocks, geopolitical disruption and demand shifts. Real estate, meanwhile, is sensitive to rising interest rates and requires either capital for a direct purchase or a tolerance for REIT price swings.

Strategy 3: Invest in Equities That Can Pass Costs to Consumers

Over long periods, stocks have historically outpaced inflation because companies can raise prices when their own input costs rise. The key distinction is pricing power, the ability to raise prices without losing customers, versus companies that lack it. Consider the following:

• Consumer staples: Companies selling food, household products and personal care items can pass cost increases through to consumers with minimal loss of volume.
• Energy: Revenue is tied directly to oil, gas and refined product prices, which are often the very cause of the inflation.
• Healthcare and utilities: Healthcare demand is relatively inelastic, and regulated utilities can petition for rate increases tied to rising costs.
• Dividend Aristocrats: Companies that have raised dividends for 10 or more consecutive years, as tracked by the ProShares S&P 500 Dividend Aristocrats ETF (NOBL), have shown the pricing power to grow income through inflationary periods.

Growth stocks with no current earnings and high valuations can be especially vulnerable, however, since rising interest rates that follow inflation increase the discount rate applied to future earnings, reducing their present value. Many high-multiple technology stocks sold off sharply in 2022 for this reason, while defensive sectors like consumer staples held up far better.

Bottom Line

Building wealth during high inflation means shifting away from the assets most damaged by it. This includes cash and long-duration nominal bonds without inflation adjustment. Instead strategy shifts toward assets that participate in rising prices or generate income that grows with them. No single strategy is sufficient on its own, however. The most resilient approach combines elements of each and also depends on your timeline and risk tolerance.

Tips for Investment During Inflation

• If you’re interested in creating or building out an investment plan, a financial advisor can work with you to identify investment opportunities and manage risks. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area. You can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• If you want to know how much inflation could affect your funds over time, SmartAsset’s inflation calculator could help you get an estimate.

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