Inflation ETFs Revisited

The International Monetary Fund (IMF) published their 2008 Spring World Economic Outlook this week (press briefing transcript is here) and highlighted the twin issues of a slowing global economy and rising global prices.

The Wall Street Journal followed up with the article Inflation, Spanning Globe, Is Set to Reach Decade High which points out several situations where the rising cost of food and fuel are pushing up prices worldwide. Examples include:

  • Rice is up 147% in past year
  • Oil is at $112 per barrel
  • Iron ore producer Vale is raising prices to customers by 65%
  • Hershey chocolate bars are up 13%

Source: International Monetary Fund

Managing Inflation Risk with ETFs

Investors can help protect their portfolios from inflation through investments in Commodity ETFs such as Victoria Bay Asset Management’s United States Oil Fund (Amex: USO) , Barclay’s iPath S&P GSCI Crude Oil Total Return Index ETN (NYSEArca: OIL) and Powershares DB Agriculture Fund (Amex: DBA). See our post on USO and OIL here Oil ETFs and our post on on DBA here Revisiting Agriculture ETFs.

A more direct approach is through TIPS ETFs that specialize in inflation protected government securities such as iShares Lehman TIPS fund (NYSEArca: TIP), State Street SPDR Barclays TIPS ETF (Amex: IPE) or SPDRs International TIPS ETF (Amex: WIP). See our post on TIP and IPE here Inflation ETFs – Investor TIPS and our post on WIP here International TIPS ETF: WIP.

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