How Can Investors Navigate Inflation With a Balanced Strategy?

Building Resilient Portfolios in an Era of Inflation

Did you know that in 2003, you could pick up lunch at Chipotle for $5, and a brand-new Honda Accord cost around $18,000? Today, that same burrito bowl will run you $10-13, and the Accord would set you back anywhere from $30,000-40,000. That’s not just nostalgia—it’s the real-life working of inflation and currency debasement, two sides of the same coin that quietly erode your purchasing power.

Inflation and Currency Debasement: What’s Really Happening

• Inflation is what you see at the checkout counter—rising prices.
• Currency debasement is the underlying cause—your money losing value because there’s more of it in circulation.

Why do we need them? When governments need money for programs, services, and debt payments, they only have a few options. Raise taxes (unpopular), cut spending (difficult), or, the most popular, door number three, borrow money and have the Federal Reserve keep interest rates low and, when needed, create new money to buy government bonds.

Think of it this way (this analogy is a bit cheesy, but bear with me): Imagine you have one pizza representing the economy, but you keep cutting it into more and more slices—those are your dollars. More dollars chasing the same amount of goods and services means each dollar buys less. That’s why your parents’ generation may have paid $20,000 for a house that now costs $400,000.

This isn’t exactly a new problem or a secret—indeed, it’s a structural feature of how monetary systems work. It’s been happening for decades, but following the pandemic and ensuing policy responses, the trend accelerated faster than usual, with 2022 as the peak, when CPI breached 9% before coming back towards the 3% level.

The Silver Lining: Growth, Innovation, and Productivity

Now, here’s the important counterpoint: while currency debasement is real, it doesn’t mean we’re all getting poorer. In fact, most of us are wealthier than our grandparents in real terms, despite decades of inflation. How is that possible?

Economic growth and technological innovation create real wealth. The economy isn’t actually a fixed pizza—it’s a pizza that keeps getting bigger. New technologies, increased productivity, and human ingenuity expand what’s possible. Think about what you can accomplish using a smartphone today versus what any amount of money could buy you 30 years ago. There is real wealth creation and a better standard of living to show for it.

Companies create value that outpaces inflation. This is why stock market investments have historically beaten inflation by a wide margin. A company like Apple doesn’t just hold money—it innovates, creates products people want, and grows earnings. When you own stocks, you own a piece of that value creation.

Your earning power can grow too. As the economy becomes more productive, wages tend to rise over time (though not always evenly). Skills, education, and career advancement can increase your income faster than inflation erodes it.

So while your dollars lose purchasing power, investments in productive assets—businesses, real estate, your own skills—can more than compensate. This is why diversified portfolios have historically preserved and grown wealth despite the ongoing issue of currency debasement.

Where Precious Metals Fit In

Though we have held and continue to hold precious metals like gold and silver in our portfolios for the past few years, recent market events have raised questions about their role in portfolios. As with any investment, we view these as “tools in our toolbox” to build balanced & diversified portfolios that we believe will best serve our clients in pursuing their goals. We know that stocks tend to deliver the most consistent and repeatable outperformance of any asset class. The simple explanation for why they are the best growth engine for building wealth is that it is an investment into the brightest and most successful businesses of our time. However, we still believe a modest precious metals allocation can provide a tremendous balance in periods when poor monetary policy or fiscal excesses crowd out opportunities in the stock or bond market. They’re not quite the wealth-building engine—productive assets like stocks are —but because they are less susceptible to financial tampering, they’re well used as a diversifier when monetary conditions get sloppy.

 Risks to be aware of:

• Volatility: Precious metals, as we have recently seen, can swing wildly. A small allocation means this volatility won’t derail your overall financial plan.
• No income generation: Unlike dividend stocks or growing businesses, gold doesn’t pay you while you hold it.
• Opportunity cost: Historically, stocks have outperformed gold more frequently and consistently over long periods with far fewer and shorter drawdowns.

The Bottom Line: Balance Is Everything

Yes, cash loses purchasing power over time through inflation and currency debasement. But humanity’s capacity for innovation, growth, and value creation has historically more than compensated. That’s why diversified investors have built substantial wealth despite continuous monetary expansion.

We believe the smart approach isn’t to bet everything on either growth or protection—it’s to balance both. We let productive assets like stocks do the heavy lifting of wealth creation, bonds serve as growth-shock absorbers and allocate a modest amount to precious metals as insurance for periods when monetary forces temporarily overwhelm economic growth.

Your financial security depends on both growing your wealth through productive investments and protecting it during challenging cycles. Our team’s focus is to navigate the unique challenges each year brings and navigate an array of investment solutions to keep you on track to pursue your goals. Every financial situation is unique, and we believe thoughtful conversations are the foundation of strong planning. If you’d like to explore how these ideas fit into your personal goals, contact Harvest Wealth Partners— we welcome the opportunity to talk through your goals and design strategies tailored to your long-term financial freedom.