Accredited Wealth Management Advisor Practice Exam 2025 - Free Wealth Management Practice Questions and Study Guide

Long-term government bonds are typically not recommended for inflation hedging because they are sensitive to interest rate fluctuations. When inflation rises, central banks often increase interest rates to combat it. This leads to a decrease in the market value of existing bonds, particularly long-term ones, because their fixed interest payments become less attractive compared to newly issued bonds that reflect higher rates.

In contrast, other asset classes like commodities, real estate, and gold and precious metals have historically shown a tendency to preserve or increase in value during inflationary periods. Commodities often see price increases in tandem with inflation, real estate can benefit from rising property values, and gold is traditionally viewed as a safe-haven asset during economic uncertainty. Thus, long-term government bonds do not provide the same level of protection against inflation, making them less suitable for hedging in such environments.