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.
But the higher yields that result 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.
Ten best inflation-proof investments
Ten best inflation-proof investments
Not all investments are equally susceptible to the effects of 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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1. I Bonds
Series I Savings Bonds, informally known as "I bonds," are a form of savings bond issued by the U.S. Treasury Department that is designed to protect investors from inflation. This is perhaps the most inflation-proof investment on the list.
The bonds have a yield that is 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 2025 have a fixed rate of 1.10% and an inflation adjustment of 2.86% for a total composite yield of 3.98%. (Percentages don't add exactly due to rounding and the effects of compound returns).
I bonds aren't without their downsides, so it's important to do your homework before buying. But if your goal is to prevent inflation from destroying your purchasing power, I bonds can be a smart choice.
2. REITs
Real estate generally does a good job of keeping up with inflation. You can add commercial real estate exposure to your portfolio through the stock market via real estate investment trusts, or 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 -0.16%).
Think of it this way: Rental rates on commercial properties have historically kept up with inflation, and the values of commercial properties are largely derived from their ability to generate rental income.
To be perfectly clear, REIT stock prices can be rather sensitive to rising interest rates, so their share prices might underperform in inflationary environments. But the point is that their businesses will generally perform just fine.
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 1.82%) gained 13% during 2022 versus a negative 18% total return for the S&P 500.
4. Look for 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 that people need (or really want) have the ability to pass cost increases along to their customers without having much of an effect on sales.
Advance Auto Parts (AAP -0.69%) 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 quite a bit more appealing when inflation pushes rates higher. As of August 2025, it was possible to find savings account interest rates of 4% 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. Focus 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 that people need tend to 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 (WMT -1.72%) is a great example since it not only sells things people need (such as groceries), but it does so at lower prices than most competitors. When consumers feel the need to cut back, Walmart's sales tend to grow.
7. Stocks with great balance sheets
When inflationary environments come along, 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 -0.1%)(BRK.B -0.39%) is a great example. Not only does Berkshire have a portfolio of subsidiary businesses that generally sell things people need, but it also has a stockpile of cash on its balance sheet as of mid-2025 -- more than $344 billion. This has not only allowed Berkshire to avoid borrowing money at high rates but also allowed the company 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, and its inflation resistance has a lot to do with it.
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.
FAQ
Inflation-Proof Investments FAQ
What investments typically perform the worst during inflation?
There are several types of investments that don't usually do well in 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 non-discretionary retailers, insurance companies, and utility companies, are some examples of 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. And commodities, or 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, this means that 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 non-discretionary 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 like banks.
