Rising inflation is still one of the top economic concerns for our clients, according to our ARQ Wealth 2025 Client Survey. To help ease these concerns, we’ve created this guide that explores how to invest during inflation while still prioritizing your financial goals.
These are general tips you can incorporate to help insulate your portfolio from rising costs and an inflationary environment. But if you’re looking for personalized investment advice, then it’s best to contact the ARQ Wealth team by calling (480) 214-9572.
Let’s explore seven strategies that can help position your portfolio for success during periods of high inflation.
Lean More Heavily Into Equities
Inflation can suppress returns on certain asset classes, like bonds, so it’s generally advantageous to lean more heavily into equities during high periods of inflation.
Stocks historically generate a 10% annual return, which is more than enough to outpace today’s inflation rate of 2.5% as of May 2025. It’s also higher than most returns you’ll find in the bond market. However, keep in mind that past performance is never a promise of future results.
You can also align an equity-focused investment strategy with your specific financial goals. Here are a few ways to use different types of stocks to support different objectives:
- Dividend stocks: Are you primarily interested in generating consistent income? If so, you can swap bonds or other fixed-income instruments for dividend-producing stocks to optimize your portfolio while still enjoying cash flows.
- Growth: Looking to generate as high a return as possible? You might want to explore adding more stocks with a smaller market capitalization, which usually generate higher returns.
- Sustainable Growth: Want to prioritize your growth without taking on too much risk? You might want to explore blue chip stocks like Caterpillar, Microsoft, or The Home Depot. These companies are still growing year over year, but don’t have the same volatility as small-cap companies.
- Mutual funds: These funds can provide diversification to help reduce your risk while still allowing you to enjoy potentially larger returns.
The consistent appreciation of the stock market can provide insulation from inflation. However, this asset class also has a higher risk level than most fixed-rate assets.
Purchase Treasury Inflation Protected Securities (TIPS)
Did you know that there’s a specific asset class designed to protect investors from inflation? They’re called Treasury inflation-protected securities (TIPS).
These are government-backed bonds designed to increase in value when the consumer price index (CPI) rises.
The price of TIPS already surged dramatically during 2021 and 2022 when inflation was soaring, which means these inflation hedges may not be as tempting as they were in years past. However, they may still be a good addition to your portfolio if you’re nervous that inflation may ramp back up.
Purchase Precious Metals
Precious metals, especially gold, can also be a part of an inflation-resistant investment portfolio by providing a good hedge if inflation increases. When inflation occurs, the real value of cash and fixed-income investments often falls, but gold tends to hold its ground or even appreciate in value, making it a popular choice for investors seeking stability.
Additionally, unlike stocks or bonds, gold isn’t tied to a company’s performance or interest rates, which can make it a valuable diversifier during inflationary periods and more stable than volatile share prices. While it doesn’t generate income, allocating a small portion of your portfolio to gold or gold-related assets can help preserve wealth and reduce overall volatility when inflation pressures mount.
Investing in commodities can yield a similar result, although to a lesser extent.
Don’t Let Cash Sit Idly
Inflation reduces the value of a dollar over time, which means that any cash sitting uninvested is slowly losing value as the years creep on. This includes cash sitting in checking and savings accounts, which typically generate minimal interest.
Cash in checking and savings accounts generates just 0.07% and 0.38% in interest, respectively. High-yield savings accounts are a bit better, generating 4.66% on average.
With the rate of inflation currently at 2.5%, both checking and savings accounts lag behind inflation. A HYSA will help you outpace inflation, but this could change if inflation starts to increase again.
However, before you transfer all of the cash in your checking account to a stock market index, it’s important to consider other factors. For example, if you have cash set aside as part of an emergency fund, then you might not care about the return that it’s generating.
Reduce Your Tax Drag
Another way to invest during inflation is to optimize your portfolio from a tax perspective.
Consider this: the rate of inflation is currently about 2.5%. This means that your portfolio is losing roughly 2.5% of its value every year through reduced purchasing power. The most common way to offset this effect is by investing and hoping that you earn a return much higher than 2.5%. However, there’s another strategy.
You can offset the impact of inflation by reducing your tax burden at a higher rate than inflation. This effectively achieves the same goal by squeezing more value out of your investments.
This is especially effective if you want to avoid making any investment decisions because it allows you to offset inflation without necessarily buying or selling any assets.
A few ways to potentially reduce your tax drag include minimizing your capital gains tax, taking advantage of tax-free investments, and even using tithing to help offset your tax bill.
Let a Professional Manage Your Money
Letting a financial professional manage your money can make a significant difference in protecting and growing your wealth, especially during periods of high inflation.
When inflation rises, it doesn’t just raise prices; it can also influence America’s economic policy, lead to higher interest rates from central banks, impact bond prices, and introduce new risks into the investment world.
It’s difficult and time-consuming to keep up with all of these changes. But, by having a wealth management professional in your corner, you can offload this responsibility and trust them to make the appropriate adjustments with your portfolio as the economy evolves.
They’ll be able to implement many of the strategies that we’ve discussed, such as pivoting to inflation-resistant investments, minimizing tax and cash drag, and ensuring your investment strategy stays aligned with your long-term goals. For example, if interest rates rise, then your advisor can deploy an appropriate response while keeping your goals and risk tolerance in mind.
Engaging the help of a professional money manager also brings a level of discipline and perspective during volatile times, helping you avoid emotional decisions that could hurt your financial future.
Final Thoughts: How to Invest During Inflation
While inflation has cooled significantly from the early 2020s, this concern is still top of mind for nearly one-in-four of our clients.
While no single strategy guarantees protection, there are seven strategies that you can leverage to help protect your portfolio from inflation:
- Lean More Heavily into Equities: Stocks have historically outpaced inflation over the long term, making them a strong option for preserving and growing real wealth when compared to bonds or other fixed-income assets.
- Purchase Treasury Inflation-Protected Securities: TIPS are government securities designed to keep pace with inflation, offering a built-in hedge through principal adjustments tied to the CPI.
- Purchase Precious Metals: Precious metals, especially gold, provide a good hedge when the dollar starts losing value.
- Don’t Let Cash Sit Idly: Cash loses purchasing power during inflationary periods, so keeping too much on the sidelines can quietly erode your wealth. However, investing involves risk, so it’s important to balance your risk tolerance with your financial goals.
- Reduce Your Tax Drag: Strategic tax planning can help you keep more of your investment gains, which is especially important when inflation is already chipping away at your real returns.
- Let a Professional Manage Your Money: A financial advisor can build a personalized, inflation-aware strategy that keeps you positioned for long-term growth while minimizing unnecessary risk.
That said, the right approach depends heavily on your unique goals, risk tolerance, and time horizon. Before making any significant portfolio shifts, please contact the ARQ Wealth team or call (480) 214-9572 so that we can learn more about your long-term objectives.