7 Ways to Hedge Against Inflation

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By Jim Woods

Inflation. It's got to be one of the ugliest words in the economic lexicon. Broadly defined, inflation is the rising cost of goods and services. As inflation rises, every dollar in your pocket is worth less and less -- and that's not good.

Inflation rates have ebbed and flowed over the past several decades, and the current debate among economists revolves around whether we will see a big surge in inflation over the next few years or if it will remain tame. Some argue that the Federal Reserve's willingness to print hordes of money in an effort to stimulate the economy, along with President Obama's plans for massive government spending, means inflation will inevitably soar. Others disagree.

We'll leave this debate for the academicians and say that if inflation does hit home, it could wreak havoc on the entire economy -- and your portfolio, especially if you're not prepared for it. The following is a list of several sectors and investments traditionally used as inflation hedges. Knowing what they are and how these inflation hedges work will give you the edge in your quest for big market returns.

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