Which assets are commonly used to hedge against inflation?

• A. Equities
• B. Real assets
• C. All of the above
• D. Inflation-protected securities (TIPS)

Answer: (C)

Inflation hedging relies on assets that either rise in price with overall inflation or preserve real value when prices climb. Real assets, such as real estate and commodities, tend to adjust with inflation because rents, replacement costs, and commodity prices move higher as the price level increases, helping protect purchasing power. Equities can also act as a hedge when companies have pricing power and can pass higher costs to customers, especially over longer horizons when growth and earnings growth keep pace with or exceed inflation. Inflation-linked securities, like TIPS, are built specifically to track changes in the price level, adjusting both principal and interest payments to maintain real value. Because these asset types respond differently to inflation and can complement each other in a portfolio, they are commonly used together to guard against rising prices. All of the above.