The SPDR DB International Government Inflation-Protected Bond Fund (WIP) corresponds to an inflation-linked basket of government bonds outside the U.S. The current yield may be an unimpressive 3%, though the 12-month annual yield is closer to 6%.
For those expecting inflation to pick up then, an anticipated 6% annual yield distributed monthly may be desirable. Moreover, the average credit quality is a solid Aa3.
The SPDR DB International Government Inflation-Protected Bond Fund (WIP) has also shown the ability to appreciate in price. In fact, WIP has really never looked back since the stock market lows of early March. It's gained a healthy 12% off those lows and it has recently entered a technical uptrend.
Bear in mind, the U.S. dollar is already showing signs of strain. Since global growth is likely to resume, while hyper-inflation is likely to be contained, WIP may be an ideal way to hedge against U.S. dollar exposure.
So the benefits of WIP are multi-faceted:
1. If inflation rises, your principal will remain intact and you'll collect a solid stream of income.
2. If the U.S. dollar decreases, WIP would appreciate in value. You are effectively investing in foreign bonds with currencies that would be rising against the U.S. dollar.
3. If stocks fall, there's no historical correlation to WIP. In fact, the S&P 500 has a slight negative correlation to foreign bonds, but not necessarily a significant one.
In effect, you have non-correlating assets in your portfolio, which is the heart of true diversification; specifically, your protfolio can still zig independently of whether stocks are zagging, zigging or spelunking!
Source: ETF Expert