Inflation Proof Your Investment Portfolio with ETF's

Although inflation has been relatively quiet in the U.S. since the late 1980s , it now seems to be some strong evidence that they could begin to heat up again with an expanding economy , with skyrocketing oil and housing prices in some major regions of the combined land . While the Federal Reserve has been the increase in interest rates , citing the threat of rising inflation , the cautious message to . Agents from the FBI that inflation is still benign and not a threat Inflation is benign ? Excuse me, but the cheapest gas I can find anywhere in this area is $ 2.23 per gallon, up nearly 50 % over the previous year, property prices in my Howard County , MD neighborhood have more than doubled in the last five years .
Inflation should really be a major concern for all investors because it reduces the value of their savings over time . History has also shown that the traditional investments in financial instruments like stocks and bonds usually fare badly in the face of soaring inflation, as is witnessed in the wild decline during the last bout of serious inflation in the 1970s .
Fortunately for investors , there was quiet a bit of improvements made ​​in the financial markets since the 1970s , and investors now have many more options available in order to protect their portfolios from the scourge of inflation. One of the best and easiest ways investors can diversify their portfolio is through the use of Exchange Traded Funds , commonly known as ETFs . ETFs you may recall are similar to passive index -based mutual funds, but they can be bought and sold on the market like stocks . There are currently more than 170 different ETFs ( and still growing !) That the investors to choose , and these ETFs cover the entire spectrum of domestic stock index on fixed income , international and real estate and commodity prices are related.
An easy way to inflation proof your portfolio then would be a part of your portfolio holdings of domestic stocks based securities , such as S & P500 to replace conventional type stocks and bonds, with an inflation -protected bonds and real estate ETF or gold ETFs .
table 1
Inflation Protected Bond ETF:
iShares Lehman TIPS Bond Fund ( NYSE: TIP)Real Estate Index ETF:
Vanguard REIT Vipers ( AMEX : VNQ )iShares Cohen & Steers Realty Majors Index Fund ( AMEX : ICF)iShares Dow Jones U.S. Real Estate Index Fund ( AMEX : IYR )Gold ETF :
streetTRACKS Gold Shares ( NYSE: GLD)iShares COMEX Gold Trust ( AMEX : IAU)By adding these alternative asset classes in their portfolio mix , investors will not only realize significant benefits from diversification as these asset classes have a very low correlation with domestic equities and fixed - income assets , but protection from the risk of inflation as well . For a complete listing of Exchange Traded Funds Visits the Nasdaq market site atMr. John J. Lah , MBA, CFA is a Principal at Waverly Financial Group a no commissions, no sales , fee -only financial advisory firm located in Ellicott city, MD specializing in asset management with Exchange Traded Funds . Mr. Lah received his MBA from James Madison University in Harrisonburg , and is a Chartered Financial Analyst . For more information about the CFA designation , please visit the CFA Institute