To best hedge inflation the investment must meet these four criteria:
1.) Must be an investment with intrinsic value (i.e. a real asset).
2.) Must lose little value and not expire with time.
For example, a loaf of bread cost more today than it did 20 years ago, however, investing in a loaf of bread would not be profitable as it will expire before being able to capitalize on it. On the other hand, for example, land, silver, and wine do not expire with time and historically increases in value.
3.) Must be divisible.
For example, a rare stamp or home may become more valuable over time; however, it is not divisible. Divisibility is the genius of being able to buy one and sell as many. For example, a barrel of wine may cost $1,000, however, it can be “split” into 300 bottles each selling for $10/bottle. Ignoring the costs associated with bottling 300 bottles, an investor can effectively spend $1,000 to make $3,000 (300 bottles x $10/bottle) due to divisibility.
Finished real estate (e.g. homes, apartments, offices, etc.) is sold by the square foot. Land when purchased correctly is bought by the acre and when sold correctly is priced by the square foot. Each one acre of land is 43,560 square feet. Envision buying one asset that can be "spilt" into 43,560. It is conceivable that LAND IS THE MOST DIVISIBLE REAL ASSET ON EARTH.
4.) Must not be overvalued at the time of investment.
It is the rise in the asset’s value that protects you; if the asset’s value has risen to unsustainable levels or "new record highs" the protection has been lost.
Do you believe inflation will continue overtime?
Are you invested in the best assets to hedge [protect] you against inflation?