One of the worst enemies of many long-term investors is inflation. During this time, money loses its value and investors find it hard to secure their capital value.
Regrettably, our current economic state of low interest rates is not able to provide solution so investors could beat inflation rates using fixed income assets. This is worst if inflation occurs during middle or long term.
One way to cover the lost in cases of rising inflation is investing in ETFs. This fund is one simple but effective way of investing your stocks, bonds, and other commodities. Using these instruments can be suitable than others depending on your time horizon and risk tolerance. But then, it is always a good idea to consider alternatives to protect your investment portfolio.
A popular vehicle for this is iShares Barclays TIPS Bond Fund. Investors can make use for this especially if they are looking for investment funds with low-risk alternatives. The par value is adjusted with TIPS while it increases in the CPI index. This fund is sure guaranteed by the government which is why it is one of the simplest forms to seek protection from inflation.
But one should note that TIPS do not protect investors when there is rising interest rates. Because of this, TIPS investors must closely check and monitor the outlook on interest rates. This is to avoid being stuck in an environment with rising interest rate. Investors should be aware that even if Federal Reserve remains low on short term rates, long term rate can anticipate the rising inflation.