Underground investor David Fessler, writing at Investment U, says the four best hedges against inflation are gold, inflation-adjusted Treasuries, energy stocks and commodities such as wheat, metals, cattle and fertilizer.

1) Gold

David recommends investors hold 5% of their portfolio in gold to hedge against a declining dollar and an inflationary economy. He says investors can easily buy gold through the SPDR Gold Trust ETF (NYSE:GLD). This tracks the price performance of gold bullion without the hassles of finding and storing the physical metal.

2) Inflation-Adjusted Treasuries

Also known as TIPS, these government bonds are actually guaranteed to beat inflation. That’s because the bond principal and the amount of interest paid increase in step with the Consumer Price Index. David says the easiest way to buy TIPS is through the iShares Barclays TIPS Bond Fund (AMEX:TIP). This year Treasuries have lost 3.9%. TIPS have returned 3.6%.

3) Energy Stocks

Oil and gas are priced in dollars. This means they tend to rise in an inflationary economy. David says an easy way to buy into energy stocks is through the Vanguard Energy ETF (NYSE:VDE), which is up 29% since its March low. VDE includes companies that specialize in drilling; equipment provision; exploration; refining; and marketing, production and transport of oil and gas products.

4) Commodities

David recommends investors consider the PIMCO Commodity RealReturn Strategy Fund (MUTF:PCRDX) as an easy way of tapping into commodities. This fund matches the return of the commodities futures market by buying commodity-linked index notes.