Inflation and Investments -- What to Buy When Prices Rise

Inflation Changes the Rules

When inflation is low and stable, almost any savings strategy works. A bank deposit, a conservative bond fund, even cash under the mattress — none of them destroy wealth quickly at 2% inflation. But when CPI climbs to 4-5% or higher, as it has in Poland, the rules change dramatically.

Some assets thrive during inflation. Others get crushed. Knowing the difference is the key to growing your wealth when prices rise.

Winners: Assets That Benefit from Inflation

1. Inflation-Linked Treasury Bonds (COI, EDO)

The most straightforward inflation hedge in Poland. COI bonds pay CPI + ~1.25% margin, EDO pays CPI + ~1.75%. Your return automatically rises with inflation. No guessing, no market timing.

Best for: Conservative investors who want guaranteed real returns.

2. Equities and Equity ETFs

Stocks represent ownership in businesses. When prices rise, companies raise their prices too, protecting revenue and profits. Over any 20-year period in history, global equities have outpaced inflation.

In Poland, you can access global markets through:

• XTB — commission-free ETF investing up to a monthly volume
• mBank eMakler — access to WSE and international ETFs
• Revolut — fractional shares and US ETFs

Popular choices:

• MSCI World ETF — 1,500+ companies across developed markets
• S&P 500 ETF — top 500 US companies
• WIG20 ETF — largest Polish companies

Best for: Long-term investors (5+ years) willing to accept short-term volatility.

3. Gold

Gold has been an inflation hedge for thousands of years. It produces no income, but its value tends to rise when currencies lose purchasing power.

Ways to own gold in Poland:

• Physical gold — coins and bars from Mennica Polska or online dealers
• Gold ETFs — traded on exchanges, no storage hassle
• Gold certificates — offered by some Polish banks

In 2022-2025, gold rose from ~8,000 PLN/oz to over 12,000 PLN/oz, significantly outpacing Polish inflation.

Best for: Diversification, 5-10% of portfolio.

4. Real Estate

Property is a classic inflation hedge. Both property values and rents tend to rise with inflation, providing a double benefit.

Polish real estate facts (2026):

• Average apartment price in Warsaw: ~15,000-17,000 PLN/m2
• Rental yields in major cities: 4-6% gross
• Property prices rose ~40-60% since 2020 in major cities

Best for: Investors with larger capital (minimum ~200,000-300,000 PLN for a studio apartment).

5. Commodities

Oil, agricultural products, metals — commodities are the things whose prices define inflation. Owning them directly benefits from price increases.

Access in Poland:

• Commodity ETFs through XTB or mBank
• Agricultural land (rising steadily at 5-10% annually)

Best for: Portfolio diversification, not a core holding.

Losers: Assets That Suffer During Inflation

1. Cash and Low-Interest Savings

The biggest loser. Cash loses value by definition during inflation. A savings account paying 4% after tax while inflation runs at 5% means you lose 1% of purchasing power annually.

10,000 PLN in a drawer loses ~450 PLN of purchasing power per year at 4.5% inflation.

2. Fixed-Rate Bonds (Non-Indexed)

Traditional fixed-rate bonds — including DOS (2-year) treasury bonds and corporate bonds with fixed coupons — lose real value when inflation rises above their rate.

A DOS bond paying 3.25% delivers a negative real return when CPI is 4.5%.

3. Long-Duration Government Bonds

If you hold 10-year or 20-year fixed-rate bonds (traded on the market, not retail EDO), rising inflation typically means rising interest rates, which crushes bond prices. Polish 10-year government bond prices fell ~20% during the 2022 inflation spike.

4. Growth Stocks Without Pricing Power

Tech startups and companies that cannot raise prices (due to competition or regulation) suffer when input costs rise but revenue does not. In Poland, some retail and tech companies saw margin compression during 2022-2023.

The Balanced Inflation Portfolio

Here is a practical allocation for a Polish investor with 100,000 PLN during moderate inflation (4-5%):

This is not financial advice — adjust for your personal situation, risk tolerance, and time horizon.

Timing: When to Shift

You do not need to dramatically change your portfolio every time inflation ticks up or down. However, some adjustments make sense:

• Inflation rising: Increase allocation to COI/EDO bonds, commodities, and real assets. Reduce fixed-rate bonds.
• Inflation falling: Consider locking in fixed-rate bonds at high yields before rates drop. Increase growth equity exposure.
• Inflation stable and moderate: Stick with a balanced allocation and rebalance annually.

Track Your Inflation-Adjusted Returns

The most dangerous mistake is thinking you are earning money when you are actually losing it. A 5% return sounds great — until you realize inflation is 5.5% and tax takes another 1%.

Freenance helps you see through the noise by tracking all your assets — bank accounts at mBank, ING, or PKO, ETFs at XTB, crypto on exchanges, and treasury bonds — in one place. Knowing your real, inflation-adjusted net worth is the foundation of smart investing during inflationary times.

Key Takeaways

• Inflation-linked bonds, equities, gold, and real estate tend to outperform during inflation.
• Cash and fixed-rate instruments lose purchasing power.
• Build a diversified portfolio tilted toward inflation-resistant assets.
• Track your real return — what matters is purchasing power, not nominal numbers.
• Use Freenance to aggregate all accounts and monitor your inflation-adjusted performance.