Investing to protect against inflation now could backfire

— -- Q: Other than buying real estate or gold, how can I harden my portfolio against the coming wave of inflation?

A: Inflation, it seems, it the top fear of many investors.

The historic level of borrowing by the federal government, many economists fear, will result in the devaluation of the U.S. dollar. If foreign investors with cash stop buying U.S. debt, the concern is that the government will need to print more dollars to repay its debts. That's a big way inflation is created.

At this point, the fear hasn't panned out. Investors seeking stability have been eager to buy U.S. debt and have driven yields down on 10-year Treasuries. And while the dollar weakened against several currencies during the summer of 2008, it has defied critics in 2009 by actually strengthening.

So, before I give you ways to protect yourself against inflation, keep in mind that you're not the only one bracing for inflation. And because inflation is so widely expected, many of the assets investors buy when they're afraid of inflation have already run up in price. That's a danger because if inflation ends up being less serious than believed, you might lose money by investing in an asset designed to protect you.