How to Invest During High Inflation — A Guide for Polish Investors

Inflation Is Rising — What Should You Do With Your Money?

High inflation is the silent thief of savings. When prices rise 10-15% per year while your money sits in a savings account earning 2-4%, you lose purchasing power every single month. Poland experienced this painfully in 2022-2024, when CPI inflation hit double digits.

The question isn't "should I invest" — it's how to invest so you don't just keep up with inflation, but beat it.

Why Holding Cash Is the Worst Strategy

Imagine you have 100,000 PLN (~€23,000) in a savings account earning 3% with 10% inflation:

• After one year, nominal value: 103,000 PLN
• Real purchasing power: ~93,600 PLN
• Real loss: ~6,400 PLN

After 3 years under these conditions, you lose nearly 20% of your money's value. That's not saving — it's a controlled wealth destruction.

Proven Asset Classes for Inflationary Periods

1. Inflation-Indexed Treasury Bonds

The best starting point for Polish investors. Poland's COI (4-year) and EDO (10-year) treasury bonds have interest rates linked to CPI inflation plus a margin.

Pros:

• Backed by the Polish government
• Interest automatically rises with inflation
• Available to everyone (buy at obligacjeskarbowe.pl)
• Compound interest (EDO reinvests coupons)

Cons:

• Low liquidity (early redemption penalty)
• Margin above inflation is modest (1-1.75%)
• 19% capital gains tax (unless held in IKE/IKZE)

Strategy: Buy inflation-indexed bonds monthly (cost averaging). Use IKE to eliminate the Belka tax.

2. Stocks and ETFs — Long-Term Protection

Over the long term, stocks have historically beaten inflation, though they can underperform in the short term. Companies can raise prices, translating into growing revenues and profits.

What to look for:

• Global market ETFs (e.g., VWCE, MSCI World) — geographic diversification
• Companies with pricing power — strong brands that can pass costs to customers
• Energy and commodity sectors — direct beneficiaries of rising prices
• Dividend ETFs — growing dividends can keep pace with inflation

Avoid:

• Unprofitable growth stocks (high inflation = higher rates = lower valuations)
• Companies with variable-rate debt

3. Gold and Commodities

Gold is the classic inflation hedge, though its short-term effectiveness is debatable.

Ways to invest in gold:

• Bullion coins (Krugerrand, Vienna Philharmonic)
• Gold ETFs (e.g., iShares Physical Gold)
• Gold on commodity exchanges

Commodities:

• Broad commodity basket ETFs
• Mining company stocks

Recommended allocation: 5-15% of portfolio as insurance, not the core investment.

4. Real Estate

Real estate has historically provided solid inflation protection — rents and property values tend to rise with prices.

Options in Poland:

• Rental property (requires 300-500k+ PLN capital)
• Foreign REITs (via ETF, e.g., iShares Global REIT)
• Real estate funds

Note: Poland doesn't yet have domestic REITs, though legislation is in progress.

5. Variable-Rate Corporate Bonds

Corporate bonds with coupons based on WIBOR/WIRON + margin automatically adjust to inflationary environments (since interest rates rise with inflation).

Risk: Higher than government bonds. Diversify — don't bet everything on one issuer.

Anti-Inflation Portfolio — Sample Allocation

For an investor with moderate risk tolerance:

• 30% — Inflation-indexed bonds (COI/EDO via IKE)
• 35% — Global equity ETFs (VWCE)
• 10% — Commodity/energy sector ETFs
• 10% — Gold (ETF or physical)
• 10% — Real estate (REIT ETF)
• 5% — Cash / short-term deposits

Key principles:

• Geographic diversification (not just Poland)
• Regular investing (DCA — dollar cost averaging)
• Rebalancing every 6-12 months

What NOT to Do During High Inflation

1. Don't Panic Sell

Inflation is cyclical — it comes and goes. Selling stocks at the bottom locks in losses.

2. Don't Hoard Excessive Cash

An emergency fund covering 3-6 months of expenses — yes. Keeping 200,000 PLN in a savings account because you "don't know what to do with it" — that's surrendering to inflation.

3. Don't Borrow to Invest

Leveraged investments in an unstable environment are a recipe for disaster.

4. Don't Try to "Play Inflation" With Crypto

Bitcoin and altcoins did not protect against inflation in 2022 — they lost 70%+ in the same year inflation was surging. Crypto is speculation, not a hedge.

Tracking Inflation's Impact on Your Finances

Monitoring whether your investments are actually beating inflation requires regular analysis. Freenance helps automate this — importing data from multiple sources (banks, brokers, crypto exchanges) and showing your real financial progress, accounting for inflation's impact on your Financial Freedom Runway.

FAQ

Do bank deposits protect against inflation?

Usually no. Deposit rates in Poland rarely keep up with inflation. In 2022-2023, with 15-18% inflation, the best deposits offered 7-8%. The real loss was several percent per year.

Which Polish treasury bonds best protect against inflation?

The 4-year COI and 10-year EDO bonds, which have CPI-indexed interest rates. Fixed-rate bonds (like TOS or DOS) lose value during rising inflation.

How much gold should I have in my portfolio?

Experts typically recommend 5-15%. Gold doesn't generate passive income, but it serves as insurance against crises and high inflation.

Is buying property a good inflation hedge?

Real estate has historically protected against inflation, but it requires significant upfront capital and time commitment (tenant management). For smaller amounts, REIT ETFs may be a better alternative.

Should I continue PPK and IKE contributions during inflation?

Absolutely. Especially PPK with employer matching (it's "free" money). Within IKE, choose funds with exposure to inflation-protecting assets.

The Bottom Line

High inflation doesn't mean you have to sit and watch your savings melt. Diversification across inflation-indexed bonds, global equities, gold, and real estate gives you a realistic chance to protect and grow your capital even in challenging macroeconomic conditions.

The most important rule: don't keep everything in cash. Even an imperfect investment portfolio is better than a savings account losing value every month.