What investments typically perform the worst during inflation?

There are several types of investments that typically perform poorly during inflationary periods. Stocks that sell things that people don't need (discretionary retail), dividend stocks, and real estate stocks are a few examples. Long-term bonds also tend to lose significant value when inflation heats up.

What stocks do well in inflation?

Companies that sell things people need, such as nondiscretionary retailers, insurance companies, and utility companies, are among the stocks that typically do well in inflationary periods.

What holds its value best during inflation?

Short-term bonds tend to hold up well during inflationary periods. Series I Savings Bonds, or I Bonds, pay more when inflation rises. Commodities and related businesses also tend to do quite well during inflation.

Are dividend stocks a good hedge against inflation?

Dividend stocks generally perform poorly during inflation. The short explanation is that when interest rates on risk-free investments (Treasury yields, for example) rise, dividend yields tend to rise as well. Since price and yield have an inverse relationship, inflation and rising rates can put pressure on dividend stock prices.

What should you not invest in during a recession?

During a recession, it can be a good idea to avoid cyclical, or economically sensitive, stocks. One good example is nondiscretionary retailers, such as those that sell luxury items and other things people don't really need. Travel-related stocks also tend to be recession-prone, as do financial stocks, such as banks.

How often should you review your inflation-proof investments?

Like any investment, it's important to review your entire portfolio periodically. The inflation rate is updated monthly as Consumer Price Index data is released, but you don't need to review that often. However, it is important to review it at least every quarter, especially if inflation is trending quickly in one direction or the other.

Can a financial advisor help me protect against inflation?

A financial advisor can help you construct an inflation-resistant investment strategy that fits your risk tolerance and long-term investment objectives. There's no such thing as a completely inflation-proof investment strategy, unless you put 100% of your money into inflation-protected bonds. However, a financial advisor can help you find a good balance between protection and return potential.

10 Best Inflation-Proof Investments in 2026

10 Best Inflation-Proof Investments for 2026

By Matthew Frankel, CFP – Updated Jul 6, 2026 at 7:48 AM EST | Fact-checked by Frank Bass

Key Points

Inflation above 2% target may spike due to recent global events, affecting stocks and investments.
Treasury securities gain appeal as safe investments during inflation, as stocks may undergo rotations.
I Bonds and REITs are top choices for hedging against inflation, offering stability and potential growth.

Inflation spiked to its highest rate in more than four decades in 2022, peaking at over 8%. It has cooled off quite a bit since then, but it remains above the Federal Reserve's 2% target and recently spiked higher due to soaring energy prices caused by the Iran war. And there's no guarantee that it won't continue to increase.

Inflation can cause significant volatility and stock market declines, and it isn't hard to see why. Inflation reduces consumers' purchasing power and makes borrowing more expensive for individuals and businesses. So, it also leads to lower demand for homes, automobiles, and other large purchases.

But the higher yields resulting from inflation also make risk-free investments, such as Treasury securities, more attractive. As a result, many investors tend to rotate money out of the stock market during inflationary periods.

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Ten best investments to hedge against inflation

Not all investments are equally susceptible to inflation. Some types of investments are rather immune to inflationary pressure. Some can even benefit from inflation.

With that in mind, here's a rundown of 10 excellent inflation-proof (or inflation-resistant) investment strategies that can help you sleep better at night during times of economic uncertainty.

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A graphic showing 10 different types of inflation-proof investments. — Image source: The Motley Fool.

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1. I Bonds

Series I Savings Bonds, informally known as I Bonds, are a type of savings bond issued by the U.S. Treasury Department designed to protect investors from inflation. This is perhaps the most inflation-proof investment on the list.

These bonds have yields made up of two components. There's a fixed interest rate that stays constant over time and an inflation-based component that changes every six months.

I Bonds issued from May through October 2026 have a fixed rate of 0.90% and an inflation adjustment of 3.34% for a total composite yield of 4.26%. (Percentages don't add up exactly due to rounding and the effects of compounding returns.)

I Bonds aren't without their downsides, so it's important to do your homework before buying. But if your goal is to protect your purchasing power from inflation, I Bonds can be a smart choice.

2. REITs

Real estate has historically held up well during periods of inflation, because rising prices tend to flow through to rents and property values over time, a dynamic often described as real estate inflation

You can add commercial real estate exposure to your portfolio through the stock market via real estate investment trusts (REITs). There are hundreds of publicly traded REITs, or you can simply invest in an index fund such as the Vanguard Real Estate ETF (VNQ -0.54%).

Think of it this way: Rental rates on commercial properties have historically kept up with inflation, and commercial properties' values are largely derived from their ability to generate rental income. To be clear, REIT stock prices can be quite sensitive to rising interest rates, so they might underperform in inflationary environments. The point is that their businesses will generally perform just fine.

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3. Commodities

During inflationary periods, commodities (and the stocks of companies that deal with them) tend to outperform the overall stock market. This can include energy companies, precious metal miners, steelmakers, and other industries.

You can also buy exchange-traded funds (ETFs) that track baskets of commodity stocks. As one example, the SPDR S&P Metals & Mining ETF (XME -1.19%) gained 13% during the highly inflationary environment of 2022, versus a negative 18% total return for the S&P 500.

4. Stocks with pricing power

Consumers tend to cut back on discretionary spending during uncertain times, including periods of high inflation. However, companies that sell things people need (or really want) can pass along cost increases to their customers without much effect on sales.

Advance Auto Parts (AAP -1.16%) is one that comes to mind. People need parts to maintain their vehicles. Also, with new vehicles becoming much more expensive recently, many will likely hang on to their existing vehicles for longer, which can be a positive catalyst for the business.

5. Savings, CDs, and money market accounts

We generally don't think of these as investments, but they certainly become much more appealing when inflation pushes rates higher. As of July 2026, it was possible to find savings account interest rates of 3.5% or more from reputable banks.

Of course, if inflation reverses course, the yields you receive from savings and money market accounts will likely trend downward. But if that happens, you can simply choose to invest the money elsewhere. In the meantime, you'll lock in a strong return while maintaining optionality for your investable cash.

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6. Focusing on things people need

When inflation rises, consumers tend to pump the brakes on spending. However, the biggest cutbacks happen in discretionary spending; that is, people stop buying things they don't need. On the other hand, businesses that sell things people need typically do just fine during inflationary periods. Utilities, consumer staples, and insurance are just a few examples of sectors that generally fall into this category.

Walmart (NYSE:WMT) is a great example, as it not only sells products people need (such as groceries) but also does so at lower prices than most competitors. When consumers feel the need to cut back, Walmart's sales tend to grow.

7. Invest in great balance sheets

In inflationary environments, cash is king. If you're running a business, you don't want to have to borrow money or refinance debt at high interest rates. So, one great strategy is to look for companies with cash-rich balance sheets and relatively low debt loads.

Berkshire Hathaway (BRK.A +0.21%)(BRK.B +0.36%) is a great example. Berkshire has not only a portfolio of subsidiary businesses that generally sell things people need but also a stockpile of cash on its balance sheet -- roughly $400 billion in the first quarter of 2026. This has allowed Berkshire to avoid borrowing at high rates and to earn billions of dollars in interest income annually.

More importantly, the cash gives it plenty of ammunition to acquire competitors or buy stocks at discounted prices during tough times. There's a reason Berkshire typically outperforms the market in years when the S&P 500 is down: its inflation resistance plays a big role.

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8. Investment properties

Owning an actual investment property isn't for everyone. Even if you hire a property manager, owning real estate is a more hands-on type of investment than buying REITs or other stocks.

However, rental properties can be an excellent way to build wealth over time and can protect against inflation. Historically, both home prices and rental rates have kept pace with inflation -- or slightly more -- over long periods.

9. Short-term bonds

Short-term bond investments are typically less price-sensitive than long-term bonds and pay more in inflationary periods. Let's say you bought a 30-year Treasury bond paying 2.5% interest a couple of years ago. If the yield on new 30-year Treasuries rises to 4%, your bond becomes intrinsically less valuable. You'll still collect your interest payments (at the 2.5% rate), but the market value of the bond -- if you need to sell it -- will drop significantly.

On the other hand, you don't see the same price fluctuations in short-term bonds. As of July 2026, the one-year Treasury yield was about 3.95%. If interest rates were to rise, it wouldn't have much of an effect on your bond's value since it's already so close to maturing.

10. Banks as net beneficiaries of inflation

Elevated inflation can certainly be a negative for bank stocks, as it can lead to lower loan demand and an uptick in consumer defaults. But there's also another side to the story.

Inflation usually leads to rising interest rates (as we've seen over the past year or so), which can boost banks' profits. After all, the core business of banks is to take deposits, lend the money, and collect interest. This can be a particularly significant benefit for the largest banks, which tend to pay low deposit rates even in higher-rate environments.

How inflation may impact different investment types

As we've discussed throughout this article, inflation can impact different investments in different ways. With stocks, there is a wide range of inflation impacts and sensitivities. Some sectors and industries tend to get hit harder by inflation than others, such as real estate.

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The bottom line

As you can see, there are plenty of ways you can invest in an inflationary environment. Obviously, not all of these are right for every investor, but there are quite a few choices. Using this list, you can decide which are the best fit for your particular goals and risk tolerance and help protect your portfolio from the effects of rising consumer prices.

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Inflation-proof investments FAQ

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About the Author

Matt Frankel, CFP®, is a contributing Motley Fool stock market analyst specializing in the real estate and financial sectors. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, Globe St, The National Desk, and other TV networks and publications for his real estate, financial, stock market, and investing expertise.

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Matt Frankel, CFP has positions in Berkshire Hathaway and Vanguard Real Estate ETF. The Motley Fool has positions in and recommends Berkshire Hathaway and Vanguard Real Estate ETF. The Motley Fool has a disclosure policy.

10 Best Inflation-Proof Investments for 2026

Key Points