If a retirement plan's portfolio includes investments designed to hedge against inflation, which asset is most commonly used?

Real estate is commonly regarded as a hedge against inflation due to its historical tendency to appreciate in value over time, often at a rate that exceeds the inflation rate. When inflation rises, the costs of goods and services increase, as do property values and rental income. This means that real estate investments can help preserve and even grow an investor's purchasing power during inflationary periods.

In contrast, the other choices do not typically provide the same protective qualities against inflation. Stocks may offer growth potential but can be volatile and do not specifically protect against inflation in a direct manner. Bonds, especially fixed-rate ones, may struggle to keep pace with inflation, leading to a decline in purchasing power. Cash equivalents often provide very low returns that may not even meet inflation rates, resulting in a loss in real value over time. Thus, real estate stands out as a key asset for hedging against inflation in a retirement portfolio.