5 Assets that Could Beat Inflation in 2024

Inflation has been the top concern for most people ever since the world reopened after covid lockdowns.

People have realised their incomes aren't keeping pace with rising prices and that's also true for the lucky ones in tech fields who got big salary hikes.

Many businesses have struggled to maintain profits over the last few years due rising prices of raw materials. The prices of most commodities shot up in the post-covid phase and didn't decline until 2023. That's three years of serious margin pressure.

This has had an impact on the world of investing too. The unprecedented rise of retail investor participation in the stock market was at least partially due to the economic stress we all felt in 2020.

Ordinary people tried their luck in the Indian stock market, many for the first time, hoping to earn some extra money. And sure enough, they did...at least till the end of 2021.

Of course, a lot of water has passed under the bridge since then and 2024 is upon us. But the need to beat inflation has remained unchanged.

Even though the rate of inflation has come down compared to the last two years, prices are still rising...and investors have to keep this in mind when planning their investments for the year.

So, let's consider 5 assets that could potentially beat inflation in 2024...

#1 & #2 Gold and Silver

Let's start with the most obvious hedges against inflation.

The gold price along with silver has gone up recently. Very few market gurus are bearish on these metals in their 2024 outlook and the reason is not hard to find.

Gold and to a lesser extent silver, are international assets. These are also a monetary assets, i.e., their prices depend fundamentally on the strength of the US dollar.

The dollar, in turn, is heavily influenced by money flowing in and out of the US and this fund flow depends largely on the direction and level of interest rates.

The US fed has recently ended its rate hiking phase. In fact, it has even signalled rate cuts in 2024. This means investors will have less reason than before to keep their money in safe US government bonds. Thus, they will move funds into riskier assets.

Some of those funds will go into stocks but some of it will go into gold and silver. This is because, smart investors know that falling interest rates will weaken the US dollar and that's positive for gold and silver, at least as far as 2024 is concerned.

Check out Equitymaster's guides on how to invest in gold and how to invest in silver.

#3 High Dividend Paying Stocks

These stocks have typically been the go-to for investors during periods of high inflation. This is because these are stocks of well-established large companies that generate huge cash flows.

These companies usually have no problem paying out a part of this cash flow as generous dividends every year. This ensures that investors stick around during difficult economic times.

Many of these companies are also able to pass on the rising raw material costs to consumers in the form of higher prices for their products or services...without losing market share.

This stability is highly prized during periods of inflations which makes these stocks very attractive.

Do check out Equitymaster's screener for high dividend payout stocks in India as well as high dividend yield stocks in India.

#4 Real Estate

Now real estate is a long-term asset but as far as 2024 is concerned, it should hold its value.

After all, interest rate hikes are over. We may see the start of a rate reduction cycle. This means EMIs will either fall or at least not rise.

When we combine this with steadily rising incomes, we can conclude that real estate will become more affordable in 2024. Of course, this assumes that developers don't hike prices too much.

Ordinarily, rising affordability tends to go hand in hand with steadily rising prices. This bodes well for real estate as an asset for the near future. This logic should hold true for not only property values but also for rents.

However, this doesn't mean one should buy any property with only the short-term outlook in mind. Real estate should only be considered as a long-term investment and should be done only after detailed due diligence by the investor.

#5 Cryptos

Wait! We're not recommending cryptos. Our point here is very simple.

Cryptos have had a disastrous time recently. 2022 was perhaps the worst year in their history. Many investors predicted their demise...and understandably so.

Now some shady cryptos have disappeared and some turned out to be nothing but scams but the main cryptos (Bitcoin, Ethereum, etc) are still around and it doesn't look like these will die anytime soon. Even Dogecoin is going strong with the 10th highest marketcap among all cryptos.

Make no mistake, there are still many problems with cryptos and there are serious regulatory challenges to their adoption as well.

We at Equitymaster are not comfortable recommending any crypto currency.

However, as far as 2024 is concerned, it's entirely possible that cryptos might continue their run up which began last year.

Does this mean the Bitcoin rally will take it to a new all-time high? Or Ethereum will soar to the moon? Or Dogecoin will become everyone's favourite meme on social media again?

We don't know and we don't want to make such predictions. But looking at the past price movement of cryptos, beating inflation in 2024 won't be a problem as long as the crypto bull market continues.

Happy investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...