Cries of “Inflation is coming! Inflation is coming!” hearken back Paul Revere’s famous midnight ride. But few can agree on exactly when it’s coming. Get on your guard by knowing what exchange traded funds (ETFs) will help protect you, whether it’s tomorrow or six months from now.
Why is everyone so concerned about inflation? The primary argument supporting it is massive government spending, which tend to sink the greenback by expanding the money supply. As consumer prices rise, your buying power will shrink, and the spiral begins.
- TIPS: Treasury inflation-protected securities use government-issued bonds whose principal is tied to the inflation rate as measured by the consumer price index (CPI). The CPI might not immediately reflect a fall in the value of the dollar stemming from a fall in Treasuries, since general weakness in the economy or other factors could keep the prices of other goods down. iShares Barclays TIPS Bond (NYSEArca: TIP) [Your TIPS Questions Answered.]
- Real Estate: Land is a tangible asset that can trump inflation. But use caution, because housing prices do not always go up along with other types of inflation. If rates rise rapidly, though, real estate may not pay off for you. SPDR Dow Jones REIT (NYSEArca: RWR) [Protect Yourself from the Government’s Deficit.]
- Gold: While the gold market might be hot now, it is no sure thing for the future. The metals is a classic inflation hedge, and can hold value, but be aware that gold prices are also sensitive to supply-and-demand just as much as inflation. SPDR Gold Shares (NYSEArca: GLD) [More Stories on Gold ETFs.]
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.