Are Alternative Investments Inflation-Proof?


In today’s volatile financial landscape, many investors are constantly seeking ways to protect their hard-earned assets. One looming concern is the unpredictable nature of inflation. As conventional assets like stocks and bonds can be heavily impacted, individuals are turning their attention towards alternative investments as a potential hedge against inflation. But are these alternative assets truly effective against the rising tide of prices? Let’s dive in.


Understanding Inflation

Before discussing the efficiency of alternative investments as a hedge against inflation, it’s crucial to understand what inflation is. In simple terms, inflation refers to the increase in prices over time, reducing the purchasing power of money. For example, a loaf of bread that costs $2 today might cost $2.50 a few years from now due to inflation.


Why Hedge Against Inflation?

The value of conventional assets, especially cash, diminishes with inflation. This means the real returns on your investments decrease, even if the nominal value seems to be rising. Hence, it becomes essential to invest in assets that at least maintain or ideally increase in real value over time.


Alternative Investments as a Hedge

When we talk about alternative investments, we’re referring to assets that aren’t traditional stocks, bonds, or cash. Examples include real estate, commodities, private equity, and much more.

Real Estate

Often cited as one of the best hedges against inflation, real estate generally appreciates over time, reflecting the increasing costs of building materials and labor.


As raw materials, commodities like gold, oil, and metals tend to rise in value during inflationary periods. They’re tangible assets with intrinsic value, making them desirable during economic uncertainties.

Private Equity and Collectibles

While riskier, these can offer significant returns. Their value isn’t directly tied to the stock market, offering a level of protection against broader economic fluctuations.


Alternative Investments in an Individual Retirement Account (IRA)

One of the lesser-known strategies is incorporating alternative investments in an IRA. By doing this, investors not only hedge against inflation but also enjoy the tax benefits associated with retirement accounts.

However, not every IRA custodian allows for such diversification. This is where companies like Digital Trust1 come into the picture. As a custodian for self-directed IRAs, Digital Trust empowers investors to diversify their portfolios, allowing for a broader range of asset classes, including those that can effectively act as a hedge against inflation.

Factors to Consider

While alternative investments can provide inflation protection, it’s essential to be aware of the associated risks:

  1. Liquidity: Unlike stocks or bonds, some alternative assets might not be easily sold or converted into cash.
  2. Volatility: While some alternative investments can be stable, others, like certain commodities or private equity, can be quite volatile.
  3. Knowledge: Alternative investments often require a deeper understanding and expertise to make informed decisions.


How to Open an Account with Digital Trust

Ready to protect your financial future and hedge against inflation? Starting with Digital Trust is easy:

  1. Visit the Digital Trust website.
  2. Choose the type of self-directed IRA that suits your needs.
  3. Follow the guided process, and our team will assist you every step of the way.

With the right strategy and a trusted partner like Digital Trust, you can effectively guard your investments against the uncertainties of inflation.


1Digital Trust, LLC is a custodian of self-directed accounts whose role is nondiscretionary and administrative only. The accountholder must direct all investment transactions and choose the investments for the account. Digital Trust has no responsibility or involvement in selecting any investment. Please consult with your competent tax advisor and/or legal counsel.