Before you take the leap, use our ETF Resume to examine the country weightings in these funds to make sure you’re not taking on more risk than you’re willing.
- SPDR Barclays Capital International Treasury Bond (NYSEArca: BWX)
- SPDR Barclays Capital Short-Term International Treasury Bond (NYSEArca: BWZ)
- iShares S&P/Citi International Treasury Bond (NYSEArca: IGOV)
- iShares S&P/Citi 1-3 Year International Treasury Bond (NYSEArca: ISHG)
- PowerShares Emerging Markets Sovereign Debt (NYSEArca: PCY)
- iShares JP Morgan USD Emerging Markets Bond (NYSEArca: EMB)
Gold, Silver and the Rest
Commodities, while portfolio diversifiers, have also long been a popular way to hedge inflation. That’s because their prices tend to rise in inflationary environments, giving an added level of protection.
ETFs have made investing in commodities incredibly easy for any investor to do. But you should be aware of the tax treatment for various commodity ETFs to avoid surprises for your clients. For example, physically-backed gold ETFs are taxed as collectibles upon sale while ETFs have hold futures contracts will generate a K-1.
You can find any commodity ETF by using our ETF Analyzer and selecting “Commodity-Based ETF” from the drop-down menu. Here are some of the largest commodity funds trading now:
- United States Oil (NYSEArca: USO)
- SPDR Gold Trust (NYSEArca: GLD)
- PowerShares DB Agriculture (NYSEArca: DBA)
- iShares Silver Trust (NYSEArca: SLV)
- ETFS Silver Trust (NYSEArca: SIVR)
Currencies
If the dollar begins to head on a downtrend while inflation has prices climbing higher, another way to diversify yourself and hedge against this climate is through the use of currency ETFs. There are differences between the available option out there, though.
Rydex’s CurrencyShares funds are grantor trusts – they hold the actual currency.
The interest earned on them is accrued on a daily basis and reinvested monthly. This reinvested interest is then reflected in the fund’s net asset value (NAV).
On the other hand, PowerShares‘ currency ETFs, PowerShares DB US Dollar Bullish Fund (NYSEArca: UUP) and PowerShares DB US Dollar Bearish Fund (NYSEArca: UDN), hold futures contracts and are registered as open-ended ETFs.
WisdomTree’s currency income ETFs invest in either non-U.S. moey market securities, or in a combination of money market instruments designed to provide exposure to non-U.S. money market securities or rates. They are not money market funds. They seek to give investors current income reflective of foreign money market rates available to U.S. investors, as well as exposure to changes in the value of a specific currency relative to the U.S. dollar.
Market Vectors‘ currency ETNs are senior, unsecured debt securities that give exposure to the exchange rate between U.S. dollars and foreign currencies. The underlying indexes are also affected by movements in interest rates in the country of the underlying currency and that of the United States’.
You can find the U.S. dollar funds mentioned above along with all of the other currency ETFs in our ETF Analyzer.
Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.