Inflation Hedging Compared: TIPS, I Bonds, Commodities, REITs, Gold, and How They Did in High-Inflation Years

US consumer prices were 3.4% higher in August 2026 than a year earlier (FRED, CPIAUCNS). The market expects less: the 5-year breakeven inflation rate, which is the inflation rate that makes a 5-year Treasury and a 5-year TIPS pay the same, was 2.34% on September 29 (FRED, T5YIE). Cash is not falling behind at the moment. SOFR is 3.90% (FRED) and the 1-year Treasury yields 4.59% (FRED). The case for an inflation hedge is protection against a worse outcome than the market prices, and each hedge below has a different way of failing to deliver it.

This guide compares TIPS, I bonds, commodities, REITs, gold, and stocks on what they pay, how they are taxed, and how they behaved in the years when inflation ran at 5% or more. For the case where high inflation comes with a weak economy, see our stagflation guide.

What each hedge promises

Our commodities guide covers futures roll and fund structures, and the REIT guide covers listed REITs. Private real estate is in our private real estate funds guide, and toll roads, utilities, and other assets with inflation-linked pricing are in the infrastructure guide.

TIPS: the real yield and the breakeven

A TIPS bond pays a fixed coupon on a principal amount that moves with the CPI. What you earn above inflation is the real yield. On September 28, 2026, the 5-year real yield was 2.73% and the 10-year real yield was 2.90%, against nominal Treasury yields of 5.06% and 5.24% (FRED: DFII5, DFII10, DGS5, DGS10). At maturity a TIPS pays the inflation-adjusted principal or the original principal, whichever is greater, so deflation cannot take you below par (TreasuryDirect).

The choice between a TIPS and a regular Treasury comes down to one number, the average inflation rate over the life of the bond.

Illustration: $10,000 in a 5-year TIPS bought at the 2.73% real yield, compared with a 5-year Treasury at 5.06%. Both reinvest coupons at the purchase yield, and taxes are left out.

Solving the compounded math gives a breakeven of 2.27%; FRED's published 2.34% uses its own constant-maturity yield curve. The two are close enough that the rule is simple: buy TIPS if you think inflation will average more than about 2.3% for five years, and buy the Treasury if you think it will average less. On $10,000, the TIPS is ahead by $724 if inflation stays near 3.4% and behind by $774 if it drops to 1%.

TIPS lost money in 2022

Real yields rise when the Fed tightens, and TIPS prices fall when real yields rise. The 10-year real yield went from -1.04% at the end of 2021 to 1.58% at the end of 2022 (FRED, DFII10), and the iShares TIPS Bond ETF (TIP) returned -12.13% in 2022 (iShares) in a year when inflation was 6.45% (Dec-to-Dec CPI). Inflation protection applies to what you get if you hold to maturity. A TIPS fund has no maturity date, so a fund holder takes the price risk. If you need a fixed amount of inflation-adjusted money in a given year, a ladder of individual TIPS maturing in those years does the job better than a fund.

The tax on inflation you haven't received

In a taxable account, you owe income tax each year on the rise in the bond's inflation-adjusted principal, although you are paid it only at maturity. IRS Publication 550 says to report the increase as original issue discount, and the payer sends a Form 1099-OID. TIPS interest and adjustments are exempt from state and local tax (TreasuryDirect).

Illustration: $10,000 in TIPS bought at a 2.73% real coupon, in the first year, with the whole inflation adjustment credited at year end and a 24% federal bracket. The coupon is paid on the adjusted principal.

The higher inflation gets, the worse the mismatch, which is when you most want the hedge. At 12% inflation the tax exceeds the coupon, so it has to be paid from other money. TIPS belong in an IRA or 401(k) where possible. A taxable account can still hold them at low bracket rates or in smaller amounts.

I bonds: a low fixed rate with a $10,000 cap

TreasuryDirect lists a composite rate of 4.26% for I bonds issued from May 1 through October 31, 2026, made up of a fixed rate of 0.90% plus a CPI-based rate (TreasuryDirect). The fixed rate applies for the life of the bond, and the inflation part resets every six months from your purchase date. New rates are announced each May 1 and November 1 (TreasuryDirect).

Limits to know:

• One person can buy up to $10,000 in electronic I bonds each calendar year.
• You cannot cash a bond in the first 12 months, and if you cash it before 5 years you lose the last 3 months of interest. On $10,000 at 4.26%, that is about $107.
• The federal tax can be deferred until you cash the bond or it reaches 30 years; Publication 550 describes the yearly-reporting option as well.

The comparison with TIPS is stark. The real part of an I bond bought now is 0.90%, or $90 a year on $10,000. A 5-year TIPS gives $273 and a 10-year TIPS $290 on the same amount. Buying I bonds now locks in that low fixed rate. They still make sense for a first $10,000 held outside retirement accounts, because there is no price risk and the tax deferral is useful, but beyond that cap TIPS are the tool.

What happened in high-inflation years

Professor Aswath Damodaran of NYU Stern publishes annual returns for US stocks, bills, bonds, real estate, and gold from 1928 (dataset). We converted them to real returns using December-to-December changes in the CPI (FRED series CPIAUCNS) and split the 97 years from 1929 through 2025 by inflation.

The table shows the average real return in each group of years. "Positive years" counts the years in the 5%-and-above group when the asset beat inflation.

The 19 high-inflation years were 1941, 1942, 1946, 1947, 1950, 1951, 1969, 1970, 1973 to 1975, 1977 to 1981, 1990, 2021, and 2022. Three points stand out.

• Bonds and cash did the worst. The 10-year Treasury lost purchasing power in 17 of the 19 years, which is the risk TIPS were created to remove.
• Gold's +5.2% average hides a median of -5.7%. It gained about 59% and 48% in real terms in 1973 and 1974 and about 100% in 1979, then lost 38% in real terms in 1981 and 5.5% in 2022. A gold position works in a few big years and does little in most.
• Damodaran's real estate column was the steadiest of the group, near zero in real terms and positive in 9 of 19 years. His page does not say whether the series includes rent, so treat it as a rough guide to property values and not as a landlord's return.

TIPS are missing because they were first issued in 1997. REITs and commodity funds are missing because Damodaran's file does not include them. For those, we used other primary sources.

• Commodity futures: Gary Gorton and Geert Rouwenhorst built an equally weighted index of commodity futures from 1959 to 2004 and found that returns were positively correlated with inflation and with changes in expected inflation (NBER Working Paper 10595). More recent numbers agree in the two big inflation years. The Invesco DB Commodity Index Tracking Fund (DBC) returned 41.34% in 2021 and 19.69% in 2022, then -6.18% in 2023 when inflation had fallen to 3.35% (DBC 10-K, 2022; 10-K, 2025).
• Listed REITs: the FTSE Nareit All Equity REITs index returned 41.30% in 2021 and -24.95% in 2022 (Nareit). Rents can reprice, but REIT prices respond to interest rates first, and in 2022 rates rose fast.

The pattern is consistent. Assets that own real things or reprice contracts did better than bonds. None avoided losses in every year, and stocks, REITs, and TIPS funds fell together in 2022 when the rate rise was the main driver.

Stocks and pricing power

Nobody can screen reliably in advance for companies that will pass on costs. A firm with high margins and few competitors can raise prices, and one with fixed-price contracts cannot, but you find that out after margins move. The record above is the practical guide: in the 3% to 5% years, stocks beat inflation by 11.1% a year on average, and above 5% they did not. A broad stock fund is the base of most portfolios, and the hedges here are supplements to it. Our dividend investing guide covers companies that raise payouts over time.

Decision rules

1. Match a known future expense with a TIPS ladder. Buy individual TIPS maturing in the years you need the money, and hold them to maturity.
2. Put TIPS in a tax-deferred account. Use a taxable account only if you accept the phantom income shown above, or if your bracket is low.
3. Use I bonds for the first $10,000 a year of money you will not need for at least 12 months, and treat the 0.90% fixed rate as the cost of the tax deferral.
4. Size gold and commodities as small sleeves. A 10% sleeve that falls by half costs the portfolio 5%, and you rebalance into it after it falls. Our portfolio rebalancing guide covers the mechanics.
5. Do not own a hedge you cannot hold through a bad year. Commodity funds lost money in 2023 and TIPS funds in 2022, and gold lost purchasing power in both 2021 and 2022.
6. Compare the whole portfolio against your spending. A retiree with a pension or Social Security, both indexed to inflation, already owns a large inflation hedge; see our retirement income guide and the tax-efficient investing guide for account placement.

Some funds package several of these hedges at once. Our risk parity guide examines one that holds TIPS, commodities, and gold using borrowed money, and the alternative investments guide covers the rest of the menu.

This guide is for informational purposes only and does not constitute investment, tax, or legal advice. Yields, inflation rates, and fund data are as of late September 2026 and change daily. Historical returns come from Damodaran's dataset, converted by us with CPI data; past results do not predict future ones. TIPS, I bonds, commodities, REITs, and gold can lose value or fail to keep pace with inflation. Consult a qualified financial advisor and tax professional before investing.