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Bottom Line Up Front

  • Inflation occurs naturally from time to time, and you can protect your money by making sound investments.
  • Investing is the best way to offset the lowered value of your dollars caused by inflation.
  • Avoid drastic changes to your portfolio in down markets and resist the urge to sell.

Time to Read

4 minutes

July 27,2022

From pain at the gas pump to higher grocery prices, Americans are feeling the effects of the latest inflation surge. Unfortunately, economists still don’t know just how long this period of high inflation will last. Advice on how people should react financially has been varied and sometimes even contradictory.

If you invest or you’re thinking about investing, you’re likely concerned about your money losing value in such a volatile market. The truth is, it’s wise to invest during times of inflation. Here’s why.

Investing Offsets Inflation

Inflation occurs naturally in every economy. Luckily, strategic investments can become more valuable much faster than the rate of inflation. While your dollars will lose the 2-3% that’s common with healthy annual inflation (check out the 20-year average), you’ll have capital gains (gains you get from investing) that more than offset it. Here’s a simple example:

Hassan has $10,000 in a savings account. If the rate of inflation is 3%, by the end of the year, he’ll still have the same amount, but it will actually be worth $9,700. If he invests that money instead and earns 4%, he’ll walk away with $10,400 that has an actual value of $10,100 after he factors in inflation.

When you subtract the rate of inflation from capital gains, you get something called the real rate of return. A good investment will have a real rate of return that’s higher than inflation.

Think About Wealth in the Long Term

The federal government tries to keep inflation in check by monitoring and manipulating interest rates. When inflation creeps up, so do interest rates. This can shake the stock market and cause volatility that scares everyday investors away. Don’t get spooked! Making drastic, reactionary changes to your portfolio could hurt your long-term investing goals.

Sometimes, keeping a long-term mindset when it comes to your investment strategy means reaching out for professional help. You can review, amend or build your investment plan with a Navy Federal Investment Services financial advisor, even using our search function to find one in your state.

And remember, compound interest (the interest you earn on your interest) is more powerful than current levels of inflation.

Explore Strategic Investment Vehicles 

Want to protect your money from rising inflation? Here’s a look at several investment vehicles that are particularly suited to combatting inflationary concerns:

  • Stocks. Blue-chip stocks can be an excellent hedge against inflation. If you’re brand-new to investing, it’s easier than ever to get started with Digital Investor,1 for as little as $1. Invest in companies that are proven to withstand turbulent times.
  • TIPS. Treasury Inflation-Protected Securities (TIPS) are U.S. Treasury bonds designed to pace inflation. Since they’re backed by the full faith and credit of the U.S. government, they’re one of the safest investments you can make.
  • Money markets. These products are high-interest alternatives to checking and savings accounts. Money market accounts require a minimum deposit balance, but offer the liquidity, or availability, you’d expect from a cash account.
  • Share Certificate or Certificate of Deposit. A Share Certificate or Certificate of Deposit (CD) is a fixed-rate, fixed-term product that offers a higher rate of interest (or dividends) the longer you leave your money deposited. It’s a high-interest or dividend alternative to a savings account.

Quick Tips for New Investors

Investing in inflationary climates can be scary for new investors, but it’s essential if you want to make your money work for you. Want to find more investing resources? Check out Navy Federal Credit Union’s MakingCents hub to learn all about the basics of investing.

Next Steps Next Steps

  1. Revisit your budget and see where you can find money to invest to hedge inflation.
  2. Put your emergency fund into a cash account like a money market or certificate.
  3. Use stocks and TIPS to offset inflation and generate a real rate of return.



Navy Federal Financial Group, LLC (NFFG) is a licensed insurance agency. Non-deposit investments, brokerage, and advisory products are only sold through Navy Federal Investment Services, LLC (NFIS), a member of FINRA/SIPC and an SEC-registered investment advisory firm. NFIS is a wholly owned subsidiary of NFFG. Insurance products are offered through NFFG and NFIS. These products are not NCUA/NCUSIF or otherwise federally insured, are not guaranteed or obligations of Navy Federal Credit Union (NFCU), are not offered, recommended, sanctioned, or encouraged by the federal government, and may involve investment risk, including possible loss of principal. Deposit products and related services are provided by NFCU. Financial Advisors are employees of NFFG, and they are employees and registered representatives of NFIS. NFIS and NFFG are affiliated companies under the common control of NFCU. Call 1-877-221-8108 for further information.

This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.