Many of us are going about our lives with little regard for inflation. It can wreak havoc on us financially, though. Steep inflation can make a car that costs $25,000 this year cost, say, $27,000 next year, and $29,000 or more the year after that. Inflation has averaged around 3% annually over many years, and over 25 years, that’s enough to cut the purchasing power of your retirement dollars in half. Inflation isn’t a theoretical risk, either — inflation in America, by one measure, recently hit 7%, the highest rate in 39 years.

Keep inflation in mind as you invest. Certain kinds of stocks can help you fight it effectively. Here are three examples.

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1. Waste Management

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For starters, dividend-paying stocks can be great inflation fighters because their payouts generally increase over time, often exceeding the inflation rate. Consider Waste Management (NYSE: WM), the trash collection and recycling giant. Its dividend recently yielded 1.74%, and that payout has increased at an average annual rate of 7% over the past five years and 5.4% over the past decade. That’s certainly enough to keep up with or exceed typical inflation rates. (Another benefit for shareholders is that the company has been buying back shares, boosting the value of the remaining ones.)

If you aim to beat inflation over a long period, Waste Management is a good candidate for your portfolio for reasons beyond its dividend. It’s simply a very solid, recession-proof business since people (and companies) will need their garbage collected no matter what the economy is doing. Its stock reflects its strength, as it has averaged annual growth of 17% over the past decade — without even counting dividends.

The company is North America’s premier trash collection and recycling business, involved in everything from collection, transfer, and disposal services to recycling and resource recovery. It also owns and operates multiple landfill gas-to-energy facilities, profiting from environmentally friendly practices.

2. Apple

Apple (NASDAQ: AAPL), maker of devices that may be in your pocket, on your wrist, or on your desk right now, is another dividend payer. Its payout may seem meager, though, recently at 0.54%. It’s been growing at a respectable clip, though, averaging annual growth of 9.1% over the past five years. It, too, has been executing stock buybacks.

Apple offers some protection against inflation not only through its dividend but also through its business. When inflation results in steeper prices for the components of its various devices, it can simply hike the prices it charges for them. Some Apple revenue generators, such as the App Store and services such as Apple Pay and Apple TV+, don’t even have conventional raw materials to worry about.

Raising prices isn’t an easy option for many companies that are fighting competition fiercely, but Apple has some powerful competitive advantages — its brand and the sticky ecosystem it has built. Any product with an Apple logo will be taken seriously, assumed to have been designed thoughtfully. Once you have one Apple product, it’s hard not to stay within the Apple universe for your future device needs, as its offerings can work so well together, such as in the connectedness between an Apple Watch and an iPhone.

Apple has been a phenomenal performer for investors for a long time and is likely to remain a standout.

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3. Financial Select Sector SPDR ETF

Bank stocks are another solid inflation-resistant strategy for your portfolio. That’s because the Federal Reserve will often raise interest rates in inflationary environments, as it is likely to do in the coming year or so, to try to slow down a booming economy. Higher interest rates can hurt some businesses and consumers, such as those who want to borrow money. But it can be good for others, such as lenders. When interest rates rise, banks will generally raise the interest rates they charge borrowers more than they raise the rates they pay depositors, thereby setting themselves up for greater profitability.

There are more than a few solid bank stocks you can consider for your portfolio, but you would do well to also consider bank-focused exchange-traded funds (ETFs), which are funds that trade like stocks, often with low annual fees. The Financial Select Sector SPDR ETF (NYSEMKT: XLF) is a fine example, charging an expense ratio (annual fee) of just 0.12% and averaging returns of close to 14% annually over the past decade. That excludes dividends, and the ETF recently yielded 1.25%. Here are its top holdings, as of Jan. 25, 2022, and the percentage of the ETF’s overall value that they represented.

Stock

Weight in ETF

Berkshire Hathaway

13.1%

JPMorgan Chase

10.1%

Bank of America

7.6%

Wells Fargo

5%

Morgan Stanley

3.3%

Schwab

3.2%

Citigroup

2.9%

This ETF will give you instant exposure to many of America’s biggest banks and financial services companies. Berkshire Hathaway, for example, is a giant in the insurance business and owns big chunks of many businesses, such as Bank of America, American Express, and Moody’s. Its vast energy holdings are inflation-resistant, too.

These are just a few investments you might consider adding to your portfolio to keep inflation from eating away at your nest egg’s purchasing power over time. A little digging will turn up plenty more.

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Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Selena Maranjian owns American Express, Apple, and Berkshire Hathaway (B shares). The Motley Fool owns and recommends Apple, Berkshire Hathaway (B shares), and Moodys. The Motley Fool recommends Charles Schwab and Waste Management and recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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