Definition of Inflation hedge:
Inflation hedging can help protect the value of an investment. Certain investments might seem to provide a decent return, but when inflation is factored in, they can be sold at a loss. For example, if you invest in a stock that gives a 5% return, but inflation is 6%, you are losing that 1%. Assets that are considered an inflation hedge could be self-fulfilling; investors flock to them, which keeps their values high even though the intrinsic value may be much lower.
An investment whose value tends to increase at a greater rate than inflation, contributing to the preservation of the purchasing power of a portfolio.
An inflation hedge is an investment that is considered to protect the decreased purchasing power of a currency that results from the loss of its value due to rising prices either macro-economically or due to inflation. It typically involves investing in an asset that is expected to maintain or increase its value over a specified period of time. Alternatively, the hedge could involve taking a higher position in assets, which may decrease in value less rapidly than the value of the currency.
How to use Inflation hedge in a sentence?
- Limiting downside risk is a major commonality between institutional investors and currency hedging is a common practice.
- Inflation hedging can be used to offset the anticipated drop in a currency's price.
Meaning of Inflation hedge & Inflation hedge Definition