Monday Money Tip: Inflation's rise means new investment strategies

Grocery prices are rising with inflation; with the right investments, you can benefit from the jump.
Grocery prices are rising with inflation; with the right investments, you can benefit from the jump. (Bloomberg)
Posted: July 08, 2014

Inflation is making a comeback - although the Federal Reserve doesn't think so - prompting us to determine how we might hedge against it, or benefit from rising prices.

Witness higher prices everywhere: at the grocery for meat and coffee, at the gasoline pump, rents, even health care.

Invest in companies that benefit from rising prices, such as exchange-traded funds Market Vectors Agribusiness ETF (MOO) that correspond to the price and yield of the Market Vectors Global Agribusiness Index. Its top holdings include related stocks such as Monsanto Co., Syngenta AG, Deere & Co., Potash Corp. of Saskatchewan, and Archer Daniels Midland.

Inflation is the enemy of those living on fixed incomes, as it erodes the value of those payments. So another option is buying TIPS, or Treasury Inflation Protected Securities, as U.S. inflation-indexed bonds are known.

If you buy TIPS or precious metals for your portfolio, remember it's important to buy TIPS in a tax-exempt retirement account. TIPS principal is adjusted by changes in the Consumer Price Index. TIPS pay interest every six months and are issued with maturities of five, 10, and 30 years.

Precious metals such as gold, silver, and platinum may be recovering into the second leg of a bull market, according to one investor who believes these are excellent hedges against inflation.

Fred Hickey, a market strategist and investor, wrote in a bulletin to clients Wednesday that he believes central bank bond-buying and money printing is entering a new phase that will trigger inflation. U.S. inflation in May clocked in at 2.15 percent, the highest in 15 months, while the consumer price index rose at its fastest pace in more than a year, Hickey noted.

Fed Chair Janet Yellen dismissed the CPI data as "noisy," but Hickey disagrees.

"Many Americans now know that their costs of living are rising and their real incomes have not kept pace," wrote the Nashua, N.H.-based investor in his newsletter, the High Tech Strategist.



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