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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Diversify to Fight Inflation

Stocks in this article: TIP GLD SPY

The Federal Reserve has sustained an unprecedented effort to increase the money supply while keeping short-term rates next to zero, and some funds like TIP have skipped dividend payments to investors because of low rates. TIP is a good way to protect a small portion of your portfolio against the risk of rising rates in the future.

TIP should be an investment for the long haul, however, and investors looking to capture the upside will have to endure the current doldrums stalling the fund. TIP owns solely inflation-protected securities backed by the U.S. government, which also may provide some comfort to investors looking to minimize credit risk in at least a portion of their portfolios. TIP is a good low cost way to add inflation protected securities to the mix.

Index ETFs such as iShares Russell Midcap Index (IWR), S&P Depository Receipts (SPY), PowerShares QQQ (QQQQ) and the DIAMONDS Trust (DIA) offer investors a low-cost vehicle to diversify their portfolios and stem the effect of inflation.

IWR is a low cost mid-cap fund that invests in a large number of securities to provide investors with diversification. SPY is a plain vanilla approach to large-cap investing, and this fund has had a high correlation to broader market movement. SPY is also one of the cheapest ETFs available.

Investing in ETF index funds helps to cut costs and take some of the guesswork out of diversified investing. While U.S. equity index funds are not "inflation proof," many have outperformed over time and provided more stable returns for conservative investors.

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