5 ETF Ideas to Hedge Against Rising Inflation

ETFs that track Treasury inflation protected securities such as the iShares TIPS Bond ETF (NYSEArca: TIP) track a type of Treasury security that is indexed to inflation as a way to shield investors from the negative effects of inflation. The securities’ par value rises with inflation as measured by the Consumer Price Index while interest rate remains fixed. TIPS also offer investors another layer of diversification as many aggregate bond funds exclude TIPS from their holdings.

Related: ETF Trends Fixed Income Channel

Precious metals and gold ETFs, such as the SPDR Gold Shares (NYSEArca: GLD), are a great way to fight inflation. Inflationary pressures could serve as a catalyst for the yellow metal and for gold-related ETFs. By some metrics, the Fed has under-estimated U.S. inflation, which could prove beneficial to gold because the yellow metal is historically a popular inflation fighter or act as a physical store of wealth.

Some traders can also take advantage of higher gold prices with gold miners ETFs, including the VanEck Vectors Gold Miners ETF (NYSEArca: GDX), the largest exchange traded fund dedicated to gold mining stocks. Gold producing companies see profitability rise along with the price of gold, making this sector another good option for combating inflation and assuming gold performs well when inflation accelerates.

Additionally, investors can also gain broad commodities market exposure through something like the United States Commodity Index Fund (NYSEArca: USCI). Academic studies have found that commodities protected against inflation better than stocks and bonds and consistently outperformed traditional assets during periods of rising inflation.

For more information on ETFs, visit our ETF Performance Reports category.