The practice of protecting one's wealth or purchasing power from the negative effects of rising prices is referred to as hedging against inflation. Inflation erodes the value of money over time, so individuals and businesses must take precautions to mitigate its effects. Investing in assets that tend to increase in value as prices rise, such as real estate, precious metals, and stocks is one way to hedge against inflation. Another strategy is to invest in income-producing assets, such as rental property or dividend-paying stocks because the income generated can help offset the effects of rising prices. Diversifying one's investment portfolio is also important because it can help reduce the overall risk associated with inflation.

Hedging against inflation is a strategy used to protect the purchasing power of assets when inflation erodes currency value. Inflation-linked investments, like Treasury Inflation-Protected Securities (TIPS), real estate, commodities (e.g., gold), and certain stocks, can serve as effective hedges. These assets often appreciate as inflation rises, helping to balance or outpace the loss in purchasing power. Real assets like real estate and commodities often benefit during inflation, as their values generally rise with increasing prices. Stocks, particularly in sectors like energy and utilities, can also perform well if companies can pass increased costs to consumers. Diversifying across these inflation-resistant assets can provide stability and help maintain asset value in an inflationary environment, which is crucial for long-term financial planning and wealth preservation.