How To Fight Inflation With ETFs

As the government has inundated the U.S. economy with stimulus packages, budget deficits, bank bailouts and cash, many think that the end result will be inflation.  So how can one use exchange traded funds (ETFs) to fight it?

Andrew Leckey of the Tribune Media Services states that from 1941 to 1947, when inflation averaged 7.5%, the top-performing stock segments were U.S. small-cap value stocks, up 28%; micro-cap stocks, up 22%; and large value stocks, up 17%, and it is not unreasonable to expect the same.

For this reason he suggests looking at the Vanguard Small Cap Value (VBR), the iShares Russell Microcap Index (IWC) and the Vanguard Value ETF (VTV).

Another class to consider when dealing with inflation is the Treasury Inflation Protected Securities (TIPS), which pay a steady yield and adjust as the U.S. Consumer Price Index moves.  A good way to access TIPS is through the iShares Lehman TIPs Bond (TIP), PIMCO Broad U.S. TIPS (TIPZ) or SPDR Barclays Capital TIPS (IPE).

Gold and silver are also popular and useful inflation hedges.

With the proper strategy and utilization of some of the previously mentioned ETFs, one can capitalize on an opportunity.

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