The Little Book of the Shrinking Dollar: What You Can Do to Protect Your Money Now

Five Quick Inflation-Proofing Moves for Your Portfolio

Here are five quick portfolio additions you can make to catch up and outpace the true bogey: inflation.

1. Cash-rich companies. Remember those stuffed-with-cash S&P companies earlier? Obviously, they’re preparing for the worst. They also pay dividends, which helps cushion your return during times when share prices flatline or fall. (Should we enter a period of deflation, a cash-rich company will still be your best friend. As a cash cow company will have little or no debt, it’ll do better than the firms that borrowed heavily, or need to borrow. After all, its debt-laden competitors will be paying back loans with increasingly valuable dollars they’ll wish they could spend elsewhere.)

2. Stocks that hold pricing power. Look for companies that can easily pass costs onto customers or end users. This especially applies to industries like health care and pharmaceuticals, chemicals, commodities, and consumer staples.

3. Consider commodities. Whether you add a few exchange-traded funds (ETFs) to your portfolio or select miners or buy options on commodities, this is an avenue that tends to do well as prices climb. If you had gotten scared after the first oil shock in 1973 and plunged into the Goldman Sachs Commodity Index, you’d have seen returns of 12.1 percent per year until 1981 versus average annual inflation of 9 percent. We already saw commodities protect investors in 2008, when prices of things like potash and gold went flying ...