Five Assets for Hedging Against Dollar Inflation or Deflation

photo.cmsAs the stock markets continue to recover (assuming it has not done yet), the talk of inflation is coming back in the news. Our government has pumped in so much of printed money in the system that there is a concern that US economy will experience inflationary times. There is no denying that inflation will take away chunk of our real returns from overall investing returns.

Many of the well known economists and investors (including Warren Buffett) have expressed concerns about inflation. Among all the experts and pundits, I believe, David Swensen gave a very pragmatic and down to earth response to this question in an interview on WealthTrack. According to Swensen, he does not know what will happen. He cannot predict it. There will be inflation if the recent pumping of money supports the economy and growth returns to US economy. If there is no growth, then there will be deflation of dollar value. His message was to address these issues with proper diversification and asset allocation. As individual investors what can we do to (or rather how can we) blunt the effect of inflation or deflation. Following are five aspects one can look into to manage their asset diversification.

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David Swensen Interview – Reiterates Diversified Asset Allocation

Over last weekend, I came across few video clips of David Swensen over at YouTube. It appears to be an interview with some business magazine. I believe any long term investor cannot skip this writing and thoughts about asset allocation, diversification, and alternative asset class. Furthermore, how can one miss his dislike of mutual fund industry and the joker at Mad Money. Mr. Swensen calls mutual funds industry as a marketing industry. After Warren Buffett, its David Swesen whom I admire the most. Both of them have one strikingly similar advice for individual investors, and that is, invest in index funds. At the same time, the significant difference between the two is that Swensen’s thoughts appear to be more pragmatic (on relative basis) for individual investors while Buffett’s skill still continues to remain more of an art.
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