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Inflation Hits a Record High: 3 Ways to Protect Your Portfolio

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Inflation climbed to 3.7% last month — the highest rate since 2011. Rent, fuel, and groceries are all noticeably more expensive this year, as the nation grapples with supply-chain issues and an oversupply of currency from the Bank of Canada. 

The depreciating value of capital is bad news for investors. It’s an invisible drain on your wealth. Here are three ways to protect your assets in the near term. 

Real estate

Hard assets or tangible capital is probably the best way to sustain wealth during inflation. As mentioned before, rents are skyrocketing. The average rent on a two-bedroom condo in Toronto is up 20% this year. The purchase price is up even more. 

That shouldn’t be surprising. The cost of housing is a core element of your cost of living. This is why real estate or real estate investment trusts (REITs) could serve as inflation-hedges. 

SmartCentres REIT (TSX:SRU.UN) is my top pick for this category. The company has a diversified real estate portfolio that’s favourably positioned for the economic headwinds we face. Its residential portfolio is quickly expanding, but the core retail and pick-up locations are what make this REIT so reliable. 

SmartCentres REIT is currently trading at 19.7 times earnings per share and offers a 6% dividend yield. It’s an underappreciated tool to fight inflation. 

Commodities

Besides real estate, commodities should see higher prices when inflation strikes. The price of fuel is already 38.4% higher than July of 2020. Natural gas, wheat, and steel are all up 30.9%, 15%, and 215% since 2020. 

Fortunately, Canada is a mining hub. Teck Resources (TSX:TECK.B)(NYSE:TECK) could serve as an inflation hedge. The company’s copper and zinc operations have experienced higher prices and better profitability over the past year. Unsurprisingly, the stock is up 64% over the past year. 

The stock dropped 10% recently, which could be an opportunity for investors to get in. As demand for basic metals remains elevated, Teck stock should serve as a safe haven for investors worried about inflation. 

Bitcoin (maybe)

If you’re looking for a cutting-edge solution to inflation, some experts suggest Bitcoin. The world’s most popular cryptocurrency has a hard cap on its total supply. There can only ever be 21 million BTC. 18.8 million of that has been mined already. 

You could buy Bitcoin directly or add an exchange-traded fund like Purpose Bitcoin ETF (TSX:BTCC.B) to your portfolio. The ETF qualifies for your Tax-Free Savings Account (TFSA), which means you can mitigate the tax impact of Bitcoin gains. The ETF structure also means you don’t have to store and protect the digital asset yourself. 

However, Bitcoin’s ability to withstand inflation is unproven. It’s a volatile asset. Despite that volatility, the price of BTC is up 280% over the past year — far higher than the rate of inflation. Maybe a little exposure to this new asset class is worth considering. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool owns shares of and recommends Teck Resources. The Motley Fool recommends Smart REIT. Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned.

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