Usually when thinking about inflation protection, the first asset that comes to mind are fixed income bonds referenced to the IPCA. However, there are also exchange-traded assets that have the feature of protection against inflation. I exemplify two ways to use the stock market to invest in assets that protect you from inflation in the long run.
There is no consensus on the statement that stocks in general are assets that protect investors from inflation. In fact, there are academic studies such as Gultekin’s from 1983, published in the prestigious Journal of Finance that contradict this statement.
However, some specific assets have characteristics that notably classify them as protectors of high prices in the long term.
I’m talking about companies that have contracts that are adjusted for inflation. This generally occurs in public service concession companies, for example.
Notably, those whose revenues depend less on consumer demand tend to be more correlated with fixed income securities referenced to the IPCA. For example, the electric power transmission companies: Taesa, Transmissão Paulista and Alupar.
The graphs above show the evolution of Alupar’s and Transmissão Paulista’s share prices in relation to the index of public securities referenced to the IPCA with maturity over five years (IMAB5+).
A long-term alternative for hedging against stock market inflation is real estate investment funds (FIIs).
As the assets that FIIs invest are usually also updated by some index of inflation, in the long term, these assets are good protectors against inflation. Especially CRI real estate funds, as they do not suffer from the risks of vacancy in the projects.
The chart above shows the evolution of the real estate fund index and the IMAB5+. The relationship between the two graphs is evident.
It is important to mention that stock traded assets have greater risk. Therefore, your investment must be carried out with caution, in line with the investor’s profile and with a long-term horizon.
Michael Viriato is an investment advisor and founding partner of Investor’s House
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I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
