The Consumer Price Index for June will be released on Tuesday,
and the consensus forecast is for a 0.3 percent
This index is calculated monthly by the Bureau of Labor
Statistics as an aggregate measure of price changes of goods and
services consumed by urban households in the United
The CPI is considered an important measure of inflation, as
rising consumer prices can weigh on economic growth. The Federal
Reserves' quantitative easing measures and zero interest rate
environment has also spotlighted inflation as a key measure of
future policy changes.
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If you are worried about the inflationary pressures eroding
your future purchasing power, the following ETFs are designed to
combat those pernicious effects:
The IQ Real Return ETF (NYSE:
) seeks to provide a hedge against the effects of inflation by
providing a "real return" above the current inflation rate as
measured by the Consumer Price Index. CPI invests in an
underlying basket of other exchange-traded funds that include
low-duration bonds, stocks and REITs.
The secondary goal of this portfolio is a low-volatility
solution through its multi-asset construction, with intra-day
liquidity and transparency. The current expense ratio of CPI is
listed at 0.48 percent.
Because of the overweight nature to short-duration treasury
bonds, CPI is most certainly a conservative way to navigate an
inflationary environment. This ETF has returned 2.48 percent over
the last year.
Another method of fighting inflation is through treasury
The iShares TIPS Bond ETF (NYSE:
) is a basket of treasury securities that adjust their coupon
payments according to the Consumer Price Index. This creates a
gradually rising stream of interest payments when the price of
goods and services is increasing.
TIP is the largest ETF in this space, with more than $13
billion in total assets. This fund has an effective duration of
7.64 years and a 30-day SEC yield of 3.75 percent.
The PIMCO Global Advantage Inflation-Linked Bond ETF (NYSE:
) is a similar fund with a global slant. This ETF has exposure to
U.S., European and emerging market inflation-adjusting
ILB has a lower effective duration of 6.68 years based on its
current portfolio makeup that includes a significant allocation
to Brazil, Italy and Germany.
Despite relatively tepid inflationary statistics over the last
several years, the specter of higher interest rates and rising
consumer prices is a risk that these ETFs can help mitigate.
© 2014 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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