Fighting Inflation in Your Investment Portfolio is as Easy as 1-2-3

John Robinson |

Fighting Inflation in Your Investment Portfolio is as Easy as 1-2-3


By John H. Robinson (September 2022)

Rampant inflation has been the hottest hot topic in the financial news all year. In Washington, policymakers are pointing fingers of blame while racking their brains for economic solutions that will quell inflation and enable workers’ wages to better maintain purchasing power. Such complex policy decisions are beyond the realm of my expertise, but helping consumers (particularly retirees) keep pace with the cost of living in their investment portfolios is squarely in Financial Planning Hawaii’s wheelhouse.  Below are three tools that are remarkably effective at fighting inflation.

  1. Series I Savings Bonds – As I have written in a number of posts over the past year, the attraction to I-bonds is that the interest rate is adjusted every six months to exactly match the consumer price index (CPI).  If inflation is 9%, the bonds will earn 9% for the next six months.  While the bonds have a second interest rate component as well, it is currently set at 0%, so investors in savings bonds today can expect to earn a nominal return equal to the inflation rate and a 0% real return (i.e., inflation-adjusted return).  This is far better than the low nominal and sharply negative real return investors are likely to earn in bank deposits.  As I have noted in previous articles, a limitation of I-bonds is that investors are capped at $10,000 per year for their I-bond purchases though there are a few artful ways in which people can modestly boost this figure.  I-bonds also may not be purchased in IRAs. Series I savings bonds may only be purchased through the Treasury Direct website.

Best Use – As a substitute for CDs or bank reserves that the consumer will not need for a least 12 months.


  1. Treasury Inflation Protected Securities (TIPS) – Like Savings Bonds, TIPS are issued by the U.S. Treasury and are backed by the full faith and credit of the federal government.  Unlike savings bonds, TIPS are publicly traded securities and may be purchased either through the treasury auctions or through most investment brokerage firms.  As with regular treasury notes and bonds, TIPS carry an interest rate that is paid out semi-annually. The interest rate on TIPS issued today is typically paltry.  However, the appeal of TIPS is that the principal is adjusted each year to match the inflation rate each year until maturity, interest is paid on the inflation-adjusted principle.  However, tax-reporting on TIPS can be a bit complicated and investors who hold TIPS in taxable investment accounts must pay tax on the credited principal adjustment and the interest each year.  For this reason, we only recommend TIPS for IRAs and qualified retirement accounts.


Best Use – TIPS with 3-5 year maturities may be a good addition to the fixed income portion of an IRA portfolio.  We find that they are particularly well-suited as a CD/bond substitute for consumers who are 3-5 years away from retirement, as the TIPS can assure that this money will not lose purchasing power.


  1. Rising Dividend Stocks – Many readers of this blog likely know that I regard direct indexing using rising dividend stocks as an all-weather passive income investment strategy, but its virtues tend to shine brightest when inflation heats up.  The underlying principle is that screening a broad index of dividend-paying stocks for a subset of companies with a propensity for increasing their dividends each year at a rate that is typically higher than inflation may be a sound strategy for filtering out financially healthy companies.  In the current environment, it may be possible to build a portfolio of 25-50 companies with an average current dividend yield of 3-4% and an average annual dividend growth rate of 5-7% or more.  Of course, neither dividends nor the companies’ stock prices offer any future guarantees.  However, to the extent that company-specific risk can be diversified, rising dividend stocks offer the Siren’s call of attractive current income, the expectation of inflation protection through dividend increases, and the potential for future share price appreciation that often comes from long-term investing in healthy companies.


Best Use – Because dividends paid from qualified U.S. companies are taxed at a lower rate than interest income and earned income, the rising dividend strategy lends itself well to taxable investment accounts, though it certainly could be used as a growth and income generation strategy in retirement accounts as well.  Investors who apply this strategy should be aware that the share prices of rising dividend stocks tend to fluctuate with the market just as other stocks do. 

In sum, investors have three powerful and reasonably straightforward tools at their disposal for keeping up with inflation.   Depending upon client circumstances, at FPH we routinely recommend all three individually and often in concert.

See also:

A Complete Guide to Investing in Tips and I Bonds (2022) (Money for the Rest of Us)

A Roadmap to Investing in Rising Dividend Stocks (FPH Blog)


John H. Robinson is the owner/founder of Financial Planning HawaiiFee-Only Planning Hawaii, and Paraplanning Hawaii.  He is also a co-founder of fintech software-maker Nest Egg Guru.



Securities offered through J.W. Cole Financial, Inc. (JWC) member FINRA/SIPC. Advisory services offered through Financial Planning Hawaii and J.W. Cole Advisors, Inc. (JWCA). Financial Planning Hawaii and JWC/JWCA are unaffiliated entities 

Fee-only financial planning services are provided through Financial Planning Hawaii, Inc. DBA Fee-Only Planning Hawaii, a separate state of Hawaii Registered Investment Advisory firm. Financial Planning Hawaii does not take custody of client assets nor do its advisers take discretionary authority over client accounts.

The information contained herein is general in nature. Neither Financial Planning Hawaii nor J.W. Cole provides client-specific tax or legal advice. All readers should consult with their tax and/or legal advisors for such guidance in advance of making investment or financial planning decisions with tax or legal implications