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I would sincerely appreciate your advice on the following topic: what kinds of investments are available in Canada to offset (at least, partially!) the impact of inflation?

I am not a financial expert, however, price increases that I see around look substantially higher than CPI numbers, published by the government. On the other hand, it seems to me that the Bank of Canada decided to support real estate market while sacrificing the purchasing power of the dollar. Therefore, high inflation is here to stay for years. This is my personal non-expert assessment of current situation.

The situation:

My only source of income is my salary. I do not work for real estate or construction or oil/gas or other high-income industry. I managed to save some money, but now I sit and watch my money being destroyed by inflation.

My thinking:

  1. I am afraid of buying real estate. I do not think it is doable on a single income. I also observe that property taxes are going up consistently everywhere. I am afraid that I will lose both the property and money, should I get sick or lose my income.
  2. There is no Treasury Direct in Canada, so I cannot buy T-bills directly from the government as people can do in the USA. T-bills pay around 4.5% annual now.
  3. “Real Return” bonds (i.e. inflation adjusted bonds) have been discontinued by the government of Canada.
  4. Interest rates on saving accounts in “big 5” Canadian bank are miserable. I do not trust those new “on-line banks” without physical branches, so I am not looking at those.
  5. The only option, which I see, is to open a brokerage account in my TFSA and buy some high-dividend stocks within the contribution limit.
  6. I have never owned a business. I do not know how to run a business and, frankly, I have no business ideas.

Am I missing something? Are there other ways to at least partially offset impacts of inflation?

I never gambled, but now I feel stupid because I have not gambled on Robinhood or in cryptocurrencies. It seems to me that savings and 9-5 jobs are pretty much dead and the only unfortunate way forward is gambling with all the risk it entails.

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    Do you mean you should have invested in Bitcoin at 70k or what makes you think gambling would work? You don't need treasury direct to buy bonds (which still pay less than inflation so you still have a loss).
    – AKdemy
    Mar 22, 2023 at 13:22
  • Buying actual things is a hedge against inflation.
    – user253751
    Mar 22, 2023 at 19:27
  • @AKdemy I am just inundated by all this incessant noise by crypto-bros! I politely tell people that I do not have time to speculate on the market or in cryptos. But sometimes I regret that I stayed on sidelines during 2020-2021 mania.
    – user136555
    Mar 23, 2023 at 5:07
  • "I cannot buy T-bills directly from the government" You buy them via a brokerage account. Canada has online brokerages too. Besides, there's Canadian government bond mutual funds and ETFs you can easily invest in. Not sure what the issue here is.
    – user71659
    Mar 24, 2023 at 4:38

2 Answers 2

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A few thoughts:

  1. Income is typically the best way to offset inflation. Depending on your field, your income should increase naturally over time, which will give you more purchasing power.

  2. If income does not increase, then maybe it's an incentive to find a new skill that does increase with "inflation".

  3. Inflation is a very broad measure, and can partially be offset with different spending habits. If prices at restaurants are higher, for example, then learn to cook and prepare your own meals. If grocery prices are higher, then buy off-brand or less expensive foods.

  4. I think your "fear" of real estate is slightly irrational. I can understand being afraid of unknowns if you do not have experience dealing with real estate, but there's virtually no way to lose "everything" with real estate unless you are very highly levered (e.g. borrow 90% of the capital). Land will always have value. It may not grow as much or higher than inflation, but if you do not overuse leverage, you will not lose everything.

  5. "High dividend" stocks are not an inflation hedge. They are not really "income" either. A dividend is a payment by the company to its shareholders, and reduces the value of the company (and hence its stock) proportionally. So you are just trading value in the stock for cash-in-hand.

  6. Don't feel like you need to start a business - most people are not experts at running a business, and even fewer are qualified and have good business ideas. There's nothing wrong with being an employee of a good business and let them worry about running the business and having a good business plan.

Inflation just happens. It has always happened, and has been much worse in the past. You cannot control or avoid it. Get back to basics - spend less than what you earn, which may mean you need to either adjust your spending or increase your income with side hustles if you want to keep a specific lifestyle.

Hopefully your income will be positively affected by inflation, which is the biggest offset. Even inflation-based investments just guarantee a specific "real" income and are not the best ways to offset inflation (i.e. they do not provide as high of a return as other investments that might have some risk).


I realized I did not address what you should do with your money that you have saved up. Certainly sitting in cash is not the best option in higher-than-average inflation. That's a longer discussion though - what are your goals for this money? Retirement (at what age?) kids' college? Travel the world? There are lots of high quality investments that do better than inflation on average. If you have a small amount, start with some broad index funds that may not be guaranteed to grow each year but on average will grow more than inflation. If you have a larger amount, talk to a financial advisor so that you can better diversify and plan for the goals you have in mind.

Yes, inflation is a friction, but it will happen no matter what you invest in. Inflation-adjusted investments do not fully counter the effects of inflation (unless you can invest a full year's income each year), they are a bet on whether inflation will be higher in the future than predicted.

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  • "there's virtually no way to lose "everything" with real estate unless you are very highly levered (e.g. borrow 90% of the capital" <- except that most real-estate investors borrow around 80% of the capital (that's called a mortgage)...
    – user253751
    Mar 22, 2023 at 19:30
  • My presumption here is investment property, not a home mortgage. Yes you cat get foreclosed on, but not because of "inflation". It's because you can no longer afford to pay your mortgage. In fact, mortgages get easier to pay when inflation is high because it's a smaller portion of your take-home pay (assuming it goes up with inflation). Leveraged investment property is more at risk because you're relying on renters to pay your mortgage for you, and inflation can make it harder to rent out.
    – D Stanley
    Mar 22, 2023 at 20:01
  • when property values decline you have not lost the property, but you may have lost a whole property's worth of money! Yes, if inflation goes up then you have to go out and spend everything you can right now. But there's also the other scenario where the Fed actually does its damn job and property values plummet.
    – user253751
    Mar 22, 2023 at 20:03
  • The trouble is that I have missed on two "trains". First train is the "biotech". I am biologist by education and experience, so I thought of finding a job in biotech, but the biotech job market now is abysmal. A lot of biotech startups stayed afloat because of "cheap money". Now that's gone. I also thought of switching careers completely into computer programming. Now hiring in IT has stalled. That's the second train I missed.
    – user136555
    Mar 23, 2023 at 5:23
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    @user136555 You're complaining about biotech... you have no idea how bad things get in oil/gas, construction, and real estate get. Those are the very definition of cyclical industries. You also realize in construction, you're laid off 3 months of the year due to snow?
    – user71659
    Mar 24, 2023 at 4:41
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One option you haven't mentioned is to buy durable things, and store them.

Gold or other precious metals are one possibility. Buying gold offers nothing in the way of diversification. But it won't suddenly collapse in value.

Other items could include antiques, paintings, or anything else you can keep. But you're unlikely to make any money out of that unless you really understand the market for that collectable. At least gold has the advantage that all gold is pretty much interchangeable.

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    The inflation-adjusted price of gold from Jan 1980 to April 2001 is pretty scary bad. macrotrends.net/1333/historical-gold-prices-100-year-chart
    – RonJohn
    Mar 22, 2023 at 16:03
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    Agreed - gold is a poor inflation hedge, despite what the youtube videos from gold brokers tell you.
    – D Stanley
    Mar 22, 2023 at 16:38
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    @RonJohn you're cherry-picking a specific time period. Looks to me like it is indeed unaffected by inflation, but strongly affected by something else. If it was affected by inflation we'd see this line sloping downwards overall, instead we see it going all over the place but generally not going down.
    – user253751
    Mar 22, 2023 at 19:31
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    @user253751 21 years is 40% of the time since the price of gold has floated. That's hardly cherry picking.
    – RonJohn
    Mar 22, 2023 at 19:48
  • @RonJohn if you were not cherry-picking you would use, for example, all of the time since then until now, or all of the data on the graph. As you say it is 40%. What about the other 60%?
    – user253751
    Mar 22, 2023 at 19:48

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