A few years ago, inflation spiked to its highest rate in more than four decades. It has cooled off quite a bit since then, but it remains above the Federal Reserve's 2% target, and there's no guarantee that it won't rise again.
Inflation can cause significant volatility and stock market declines; it isn't hard to see why. Inflation negatively affects consumers' purchasing power and makes it more expensive for individuals and businesses to borrow money, so it also leads to lower demand for homes, automobiles, and other large purchases.
8. Buy an investment property
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 of time.
9. Stick to short-term bonds
Short-term bond investments not only tend to be less price-sensitive than long-term bonds, but they also tend to pay more in inflationary periods.
Let's say that 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 August 2025, the one-year Treasury yield was about 3.9%, and 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 can be net beneficiaries of inflation
Elevated inflation can certainly be a negative for bank stocks since it can lead to lower demand for loans 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 lead to higher profits for banks. After all, the core business of banks is to take deposits and lend out the money to collect interest. This can be an especially big benefit for the largest banks, which tend to pay low rates on deposits, even in higher-rate environments.
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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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