How to Profit from Inflation 2022: Overview & Options Guide


To many, the current level of inflation we’re experiencing in 2021 may seem frightening.

After all, if the price of everything is going up, it means you have to get by with less, right?

Not necessarily.

For example, if housing prices are going up rapidly, whether this is bad or good depends on if you are buying or selling a house. Sellers benefit when prices go up. Buyers are the ones harmed when inflation climbs if it causes home prices to rise.

In general, during periods of high inflation, those holding real assets like performing stocks, real estate, and precious metals can rise with the tide of inflation.

In this article, we’ll discuss the causes of inflation and how smart investors can survive and even thrive during these periods without losing purchasing power.

Jump to a section:

What is inflation?

Inflation is defined as an expansion of the money supply, which generally leads to an increase in the cost of goods and services in some or all sectors of the economy.

There are different kinds of inflationary environments:

  • Wage Push Inflation: These inflated prices come from rising labor costs.

  • Cost-Push Inflation: Cost-push inflation comes from rising labor and materials costs and a decrease in the aggregate (total) supply.

  • Demand-Pull Inflation: These inflated prices drive prices upward due to increased demand.

  • Hyperinflation: Hyperinflation has out-of-control price increases of usually more than 50% per month. In severe hyperinflation, prices may rise dramatically daily to the point where the currency is virtually worthless.

  • Stagflation: Stagflation may occur when an economic system with increasing prices experiences slow or no growth and a high unemployment rate.

  • Negative Inflation: Negative inflation is also called deflation. Deflation is when the prices of goods and services go down. Hyper-deflation is when prices go down quickly.

The key to understanding inflated prices is to investigate their sources to learn what may be causing them. Understanding the root causes of inflated prices helps determine if risk mitigation and inflation hedges are appropriate and if there might be investments that are potentially more profitable due to inflation hedges.

Consumer Price Index

One measurement, which estimates price inflation, is the Consumer Price Index (CPI). The CPI is a weighted average of the cost of certain bundles of consumer goods and services.

The items in the bundles are pre-selected by the U.S. Bureau of Labor Statistics (BLS) and relate to the cost of living. The BLS reports the Consumer Price Index (CPI) monthly.

The CPI started at 100 based on the index average for the years from 1982 to 1984. A value above 100 indicates the percentage increase in prices since 1984.

The CPI serves as a comparative figure from a previous period. The change from a prior month, quarter, or year is the inflation rate.

Some argue that CPI (which is measured and reported by the US government) may underreport rising prices as the calculation model is frequently changing.  Shadow stats has a useful CPI calculator to see alternative measurements.

Producer Prices

The BLS also publishes the Producer Price Index (PPI). It is a set of indexes representing the average prices of U.S production over time. The PPI is an inflation metric based on the input costs (labor, materials, and other overhead expenses related to the production of goods and services) experienced by American producers.

Purchasing Power

Purchasing power is the value of a currency, such as the U.S. dollar, regarding how much one unit ($1) can buy. Since 1913, the U.S. dollar lost about 96% of its buying power. In 2020, it took about 26 dollars to buy the same things as could be purchased in 1913 with a single dollar.

Rising Prices

Economists debate whether rising prices cause inflated prices or inflated prices cause rising prices. Whichever comes first, these two factors are intimately related.

Interest Rates

The Federal Reserve Bank (Fed) in the United States sets the interbank lending rate as the Fed funds rate. The Fed funds rate impacts the rest of the interest paid on savings accounts and bank CDs, as well as the rates charged for loans such as home mortgages, auto loans, and credit cards.

In 2008, the Federal Reserve started a Quantitative Easing policy of having the interest rate very low, near zero, to stimulate the economy. In 2021 and beyond, the Fed plans to taper off this program and raise interest charges sometime in the future.

The mere mention that the Fed is considering raising interest charges is enough to drive the stock market down. Over the past 12 years, since the global real estate market collapsed, investors have become addicted to low-cost loans based on low-interest charges. Publicly-traded corporations borrowed substantially. Many drove the price of their stock up by using borrowed funds for stock buy-back efforts.

Since borrowing costs of money are an integral part of nearly everything, as the Fed raises interest charges, this might be an inflationary action that will drive the prices of many things upward. However, if the economy overheats from a rapidly expanding money supply, this may cause inflated prices also. Such a circumstance may tempt the Fed to raise interest rates to cool down the economy.

The Fed prefers to have a stable and low inflation rate of around 2% so that it is easier for investors and producers to manage the inflationary risk with an inflation hedge and grow the economy based on past performance.

Recently, the inflation rate climbed much higher than this 2% Fed goal. In September 2021, the Fed predicted the inflation rate would be 4.2% for the year. However, the Fed claims this is a transitory inflation rate caused by the disruption of the economy due to the global pandemic. The Fed expects the inflation rate to be 2.2% in 2022.

Any action taken by the Fed usually causes stock market volatility. Inflation poses a serious risk for those facing retirement or living on a fixed income unless cost-of-living increases are the adjustments for inflation.

Inflation & Real Estate

Real estate is affected by soaring inflation in terms of the rent increases that landlords justify to tenants due to rising costs. However, prices rise from rising market values for investment property based on demand are more likely to cause inflation than to result from it. Owners of a real estate avoid having to pay rising rents for more financial freedom. Owners who rent out their property may be able to charge higher rent due to rising inflation as rents rise.

Real estate also experiences demand-pull inflation when the housing prices rise due to the low cost of mortgage financing and easy availability.

Single-family homes with low 30-year fixed-rate mortgages that are assumable by a buyer may do well in an inflationary environment. Due to inflation and market demand, home prices can soar, creating significant equity for the owner while simultaneously their fixed-rate debt is effectively reduced by inflation.

Inflation & Commodities

Commodities are one of the key drivers of inflation, as calculated in the PPI. For example, in 2021 lumber prices were about 70% higher than pre-pandemic levels. This higher cost of raw materials means the price of newly-constructed homes and other things made from lumber went up to cover the higher cost.

The National Association of Home Builders reports that increased lumber cost added about $36,000 to the new home prices. Moreover, after major home builders raise prices, it is very unlikely they will lower them even if the cost of the building materials goes down.

Lumber, energy prices for oil and natural gas, and rising automobile prices are responsible for inflation increasing in 2021 to a higher level than in the past 30 years.

Inflation & Bonds

If the Federal Reserve Board increases interest charges, investments in U.S. dollar-denominated bonds lose value. If the interest earned on long term bonds does not meet or exceed the inflation rate, long term investors in such junk bonds and bond funds lose money.

Some investment returns include annual adjustments for inflation, such as the Treasury Inflation-Protected Securities (TIPS). TIPS are U.S. Treasury bonds that adjust their value to accommodate any increase in the CPI. The principal value of TIPS increases along with inflation rates, and the interest payment then varies with the adjusted value of the bond.

Inflation & Stocks

Value stocks tend to perform better than growth stocks during inflationary periods. A value stock is a company that has strong earnings and has a low price-to-earnings (PE) ratio. This category includes high dividend paying stocks that may be one of the several asset classes of an exchange traded fund or mutual fund held in a brokerage account.

Consumer defense stocks have inherent protection against inflation rises. If the production costs go up, these companies raise prices to the consumers to maintain gross margins and profitability. Personal data shows that there are some items consumers must buy, regardless of the cost. Consumer defense companies may try to combat inflation by reducing the product size, such as a shrinking candy bar, still selling it for the same price as before, or raising prices to align with increasing costs.

Growth stocks are companies that are showing losses as they build increasing revenues and capture market share. Growth stocks are more sensitive to cost increases caused by inflation.

Mutual funds and exchange-traded funds can be focused on investments in inflation-proof asset classes and companies. Real estate investment trusts (REITS) can be managed to borrow money and make interest payments to profit from inflation.

Inflation & Loans

Those with long-term, fixed-rate loans may benefit from inflation as the loan costs remain the same even if all other prices increase. However, those with variable interest rate loans might be negatively impacted if the Fed raises the interest charges.

Examples of variable interest rate loans include adjustable mortgages and credit lines, which have interest charges that fluctuate with the Fed rates.

In general, if the Fed raises interest charges to fight off inflation caused by an overheated economy and higher prices, the cost of consumer debt goes up for things like auto loans and credit cards when interest rates begin to rise. This might even cause more inflation due to keeping pace with the general rise of these cost-of-living increases.

If the Fed lowers interest charges to stimulate the economy, the cost of borrowed funds goes down, reducing prices for some things. However, easy money in the form of low-cost loans may cause upward pressure on prices, such as the increases seen in the housing market.

Pros & Cons of Investing During Inflationary Periods

Investment strategies need to adjust in response to inflation. An investor’s goal should be to make a greater return on investment (ROI) than inflation. Otherwise, the investor’s portfolio is losing value.

For example, depositing money in a bank account for a low-return bank CD that pays less than 1% interest per year is a losing proposition when inflation exceeds 1% as it does now. The bad news is that the real value and buying power erodes by the difference between inflation and the investor’s ROI each year.

Inflation creates an opportunity to re-evaluate an investor’s portfolio to ensure the portfolio is diversified and balanced with investments that beat any negative effects that inflation makes happen.


Here are some pros regarding inflation:

  • Inflation benefits investors who have long-term, fixed-rate debt such as a home mortgage.

  • Inflation encourages immediate consumption instead of waiting for later when prices may be higher.

  • High inflation may drive commodity prices up and benefit those who trade or sell them.

  • Sudden inflation may cause increased investments as a good hedge by using tangible assets that maintain long-term value, such as gold and other precious metals, vintage wines, collectibles, fine art and real estate. If you own these items, you may benefit from inflation that drives their prices up.


Here are some cons regarding inflation:

  • A low, stable inflation rate is a sign of a growing economy with an annual sustained increase.

  • Inflation destroys purchasing power as every dollar buys less in the future.

  • Inflation causes currency devaluation and exchange rate risks to increase.

  • Inflation may cause the Fed and the US government to act, which may harm the stock market, real estate, and many investments.

  • Consumer demand goes down for discretionary items, such as luxury goods, when the prices are higher.

  • Those living on a fixed income, such as retirees, disabled people, or the elderly, find it more difficult to pay living expenses due to inflation.

  • Unpredictable, run-away hyperinflation may cause an economic system to crash and stop functioning.

How to Start Investing During Inflation

Investors should look at low-risk investments that offer a rate of return that beats inflation. Investments to consider include real assets like: stocks that benefit from or are less affected by inflation (energy, financial services, dividend paying); real estate; and precious metals.

  • Inflationary Performing Stocks

Investing in performing stocks requires you to carefully determine where your money should be invested since sectors and the leading stocks within those sectors change over time.

The goal is to invest in stocks that are leading the market during bull markets and short in the weakest stocks that are leading the market during bear markets.

You can do this by identifying the hottest sectors (for a bull market) over time and identifying the best-performing stocks within that sector. You have a good chance of making above-average returns by continuously transferring assets into the best-performing stocks.

Generally, investors look for dividend paying, lower P/E “value stocks” over “growth/momentum stocks” which are currently profitable companies with pricing power to pass on rising costs to their customers.

Additionally, since inflation is typically in one type of currency (e.g. US dollars), investing in foreign or multi-national company stocks can have the dual benefit of the rising value of the currency against the dollar.

Real Estate

  • Cashflowing Residential Real Estate

Either as a property owner or through a REIT or syndication, real estate values generally rise along with the tides of inflation.  Everyone needs a place to live after all, so the pricing power of a home or apartment can adjust to rising costs since it’s not something people can easily go without.

Cashflow (monthly profit from rents), lets the investor benefit from inflation-driven appreciation while simultaneously enjoying some recurring payments each month.

  • EquitySlice Investments

EquitySlice was designed to address a need that many investors have today, which is “where do I put my cash so that it can earn a higher rate of return, but still be accessible to me if I need it?”

An EquitySlice account allows investors to earn an above-market rate of interest, with the added benefit of on-demand access to your money.

EquitySlice is based on an innovative type of ‘Demand Note’ structure in which investor funds are used to make investments in a portfolio of high-quality, income-producing real estate assets which provide income streams to the Vault.

EquitySlice offers investors access to their money ‘on demand’ and allows investors to link their bank account to their Vault account for direct transfer of funds.  The interest rate is based on a floating rate that always pays 2% above the average savings account rate as reported by the FDIC. The current EquitySlice base interest rate is 2.06%, which is 10 – 30 times the rate of return of traditional bank savings accounts.

Additionally, EquitySlice offers premium reward options that further increase your return depending on your account balance and whether you are willing to agree to a lock-up period. The higher the investment balance and the longer the lock-up period, the better the rate of return, and investors can achieve a combined total return reaching as high as 5.06%.  Therefore, EquitySlice can be used as a short-term or longer-term investment vehicle to hedge inflation.

EquitySlice investments are not FDIC insured; instead, they are secured by a portfolio of real estate investments.

  • Precious Metals

Precious metals are a smart way to diversify your portfolio and protect against inflation. Gold is the most well-known of these, but silver, platinum, and palladium are also good choices. Each type of precious metal has its own pros and cons but in general, they are a good investment.

You can invest in precious metals without owning physical pieces of metal. Access can be gained through metal ETFs and mutual funds, the derivatives market, and buying stocks in mining companies.


Inflation doesn’t have to erode your wealth as long as you know where to put your money. Smart investors can not only survive but profit during inflationary periods like the one we’re experiencing now. Putting your investments in real assets like performing stocks, real estate, real estate investment funds, and precious metals can help you ride it out in relative safety and even prosper!

EquityBrix can help you grow your wealth through our fractional real estate investment platform. Our team marries the needs of investors and real estate developers by providing opportunities for above-market returns. EquityBrix is committed to creating high-yield investment offerings, and we can help guide you through the new era of real estate investing.

If you want more information about tokenized real estate investing go to EquityBrix or

If you are looking to grow your wealth and diversify your investment portfolio by learning about innovative ways of investing in real estate go to EquityBrix, or contact us for more information, or sign-up for the EquityBrix Newsletter.

*Disclaimer: EquityBrix is not an investment adviser. This information is for educational purposes only and does not constitute investment or tax advice. It’s important to be informed and to make your own investment decisions or do so in consultation with a professional financial advisor. Under no circumstances should this material be used or considered as an offer to sell or a solicitation of any offer to buy an interest in any investment. Any such offer or solicitation will be made only by means of a written online prospectus relating to the particular investment.


What is inflation?

Inflation is an overall increase in the price of goods and services across an entire economic system.

What causes inflation?

Many interdependent factors may cause inflation, such as:

  • Raw material shortages and cost increases.

  • Labor cost increases.

  • Hoarding.

  • Increased money supply.

  • High demand.

  • Government policies and regulations.

Why is inflation bad?

People who have cash savings accounts that pay interest rates lower than inflation lose purchasing power for their money. Those on a fixed income as workers or retirees also have this problem in that they find it more difficult to pay for things as time goes by when prices increase. Inflation lowers the value of long-term fixed-income investments such as annuities.

The Fed may raise interest rates. Borrowers with loans with variable interest rates may see their interest rates rise and pay more.

Exporters are less competitive globally because exported goods cost more for foreign buyers due to inflation changing the currency exchange ratios.

The whole economic system might be disrupted due to the economic uncertainty caused by a sudden rank inflation increase that disrupts planning processes and budgets.

Rapid hyperinflation may cause a loss of confidence in the local currency, potentially losing its usefulness as a medium of exchange.

How is inflation measured?

In the United States, the U.S. Bureau of Labor Statistics creates various bundles of goods for a Consumer Price Index calculation or a Producer Price Index calculation. The BLS then evaluates the average prices of the goods in the different bundles for a period of time (month, quarter, or year) when compared to the same period that came before.

For the CPI, there are eight major groups of over 200 categories of items, which are:

  • Apparel

  • Education and Communication

  • Food and Beverages

  • Housing

  • Medical Care

  • Recreation

  • Transportation

  • Other Goods and Services

For the PPI, which measures American production prices (imports excluded), there are ten major domestic groups, which are:

  • Agriculture

  • Construction

  • Electricity

  • Fishing

  • Forestry

  • Manufacturing

  • Mining

  • Natural Gas

  • Scrap Materials

  • Waste

What is the difference between inflation and deflation?

Inflation is when the prices of goods and services for the entire economic system go up. Deflation is when the prices and services for the whole economic system go down.

Who benefits from inflation?

Some of those that might benefit from inflation are:

  • Borrowers with fixed-rate long-term loans.

  • Governments with high amounts of public debt.

  • Owners of land and real estate.

  • Owners of an asset class that holds value, such as precious metals.

  • Commodities traders and sellers.

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