🛡️Shield Your Portfolio: 5 ETFs to Combat Inflation's Impact

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As investors, preserving the purchasing power of our money is essential, especially with rising inflation. It's crucial to explore investment options that can protect your portfolio from increasing prices. This article will highlight five ETFs that serve as effective hedges against inflation.

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Why Inflation-Fighting ETFs?💪

To qualify as an inflation-fighting ETF, a fund should consist of assets that are likely to maintain or increase their value during inflationary periods. These assets typically possess intrinsic value, generate cash flows that can keep pace with rising prices, or benefit directly from inflationary pressures.

Some of the primary categories of inflation-hedging ETFs include:

• 💵Treasury Inflation-Protected Securities (TIPS) funds

• 🛢️Commodity funds (e.g., precious metals, energy, agriculture)

• 🏘️Real estate funds (e.g., REITs)

• 💰Dividend growth stock funds

• 🛤️Infrastructure funds

Each of these categories has a unique way of combating inflation. For example, TIPS are government bonds whose principal value adjusts upward with the Consumer Price Index (CPI). Commodities like gold have historically served as stores of value during inflationary times. Real estate can generate rental income that rises with inflation while benefiting from appreciating property values. Companies with strong dividend growth can provide an income stream that outpaces inflation over time.

📊Top Inflation-Fighting ETFs

Now that we've covered what makes an ETF suitable for battling inflation. Let's examine five specific funds that could be valuable additions to your inflation-protection toolkit.

1. iShares TIPS Bond ETF (TIP)

Expense Ratio: 0.19%

Provider: iShares(BlackRock)

Past 5 Years Annualised Performance: 1.67%

TIP is the largest TIPS ETF, protecting investors from purchasing power erosion. It tracks the ICE US Treasury Inflation Linked Bond Index, which is market value-weighted and designed to measure the performance of U.S. dollar-denominated, inflation-protected securities with a minimum term to maturity of at least one year.

2. Vanguard Short-Term Inflation-Protected Securities ETF (VTIP)

Expense Ratio: 0.03%

Provider: Vanguard

Past 5 Years Annualised Performance: 3.41%

VTIP focuses on short-term TIPS, which tend to be less sensitive to interest rate changes than long-term TIPS. The fund maintains a dollar-weighted average maturity of ≤ 2 years and is a cost-effective, low-risk way to protect short-term cash from inflation.

3. Horizon Kinetics Inflation Beneficiaries ETF (INFL)

Expense Ratio: 0.85%

Provider: Horizon Kinetics

Past 5 Years Annualised Performance: N/A (less than 5 years since inception)

The Horizon Kinetics Inflation Beneficiaries ETF is an actively managed fund that seeks long-term capital growth adjusted for inflation. It invests in domestic and foreign equities of companies likely to benefit from rising prices of real assets, such as commodities, focusing on those with revenues expected to grow without a corresponding increase in expenses.

4. Fidelity Stocks for Inflation ETF (FCPI)

Expense Ratio: 0.16%

Provider: Fidelity

Past 5 Years Annualised Performance: 13.05%

The Fidelity Stocks for Inflation ETF tracks a proprietary index of large—and mid-cap U.S. stocks with attractive valuations, high-quality profiles, and positive price momentum. It emphasises industries that tend to outperform in inflationary environments.

5. Global X Interest Rate Volatility & Inflation Hedge ETF (IRVH)

Expense Ratio: 0.50%

Provider: Global X

Past 5 Years Annualised Performance: N/A (less than 5 years since inception)

IRVH is an actively managed ETF that provides inflation-protected income and seeks to benefit from a steepening yield curve and rising interest rate volatility. It primarily invests in TIPS and interest rate options.

📈Rising Prices, Resilient Returns

Inflation is a persistent threat to investors' purchasing power, but carefully selected ETFs can help defend against its corrosive impact. By understanding the key characteristics that make an ETF an effective inflation fighter, such as holding TIPS, commodities, real assets, or companies that benefit from rising prices, investors can incorporate these funds into a well-rounded portfolio built for the long haul.

Whether you prefer the simplicity of index-based TIPS funds or the more dynamic approach of actively managed funds, the key is to allocate a portion of your portfolio to assets specifically designed to weather inflationary storms.

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DISCLAIMER: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research and consider consulting with a financial advisor before making investment decisions.