Fighting Inflation with ETFs

Includes: DBC, GLD, TIP, VDE
by: Tom Lydon

As the markets and ETFs are in an uptrend, the U.S. Treasury continues to print money and unleash it on the financial system to keep the economy afloat, but what are the consequences?

A major consequence of this money printing is inflation. The likelihood that the government will stop printing money is not high at the moment – no one wants to cut off economic aid prematurely. But printing could have an unwanted side effect: inflation, states Martin Denholm of Smart Profits Reports.

The following are ways to soften the blow of inflation:

  • Take a look at the grandfather of inflation protection, gold. It can be accessed through the SPDR Gold Trust (NYSEARCA:GLD)

  • Another hedge could be found in inflation adjusted treasuries, represented by the iShares Lehman TIPs Bond (NYSEARCA:TIP). These are Treasury bonds, essentially, that hedge against inflation.

  • Energy equities such as the Vanguard Energy ETF (NYSEARCA:VDE). Energy is a factor in the cost of nearly anything you can think of, and oil and gas are priced in U.S. dollars. As the dollar weakens, energy becomes more appealing around the world.

  • Through traditional commodities such as a broad-based commodity fund such as the PowerShares DB Commodity Index Tracking (NYSE:DBC). Commodities tend to go on an uptrend in periods of inflation.

Before you act, though, have a strategy and watch the trend lines in order to see where opportunities are actually taking place

Kevin Grewal contributed to this article.