This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

New Ways to Guard Against Rising Inflation

NEW YORK ( TheStreet) -- Plenty of financial advisers are worried about inflation. High oil prices are hurting consumers, the advisers say, and heavy spending by the Federal Reserve could trigger inflation in coming years.

To protect against rising prices, the advisers suggest a traditional approach -- holding assets such as real estate investment trusts, gold and Treasury Inflation-Protected Securities. That strategy has often worked in the past, but the favored assets have all surged in recent years and now prices look rich.

Consider REITs. During the past three years, real estate funds returned 31.3% annually, ranking as the top-performing category tracked by Morningstar. As real estate shares climbed, yields fell. Now the average REIT yields 4.3%, near the record low of 3.8%, which occurred during the bull market of 2007.

Follow TheStreet on Twitter and become a fan on Facebook.

TIPS have also been top performers in recent years. Inflation-protected funds returned 9.1% annually during the past three years, outdoing the Barclays Capital Aggregate benchmark by 2 percentage points.

Now 20-year TIPS offer a puny real yield of 0.29%. The real yield on 10-year TIPS is negative, suggesting that the bonds will likely lag inflation.

Gold has surged in the past decade, climbing from $271 an ounce in 2011 to $1,653 now. If the price falls back to average levels, investors would suffer a big loss.

Should you stay away from the traditional inflation hedges? No, says Christopher Brightman, head of investment management for Research Affiliates, the money manager that oversees PIMCO All Asset (PASAX).

Brightman says that investors should prepare for an era of more inflation by holding TIPS and commodities. But because the traditional assets are so expensive, investors should diversify their inflation portfolios more broadly than they have done in the past.

"If you just hold TIPS and commodities, you may have inflation protection, but you will not have much income," he says.

For additional income and inflation protection, he suggests holding floating-rate securities and high-yield bonds. Floating-rate funds currently yield 4.4%, while high-yield funds yield 6.7%.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
AAPL $124.43 0.00%
FB $82.22 0.00%
GOOG $548.00 0.00%
TSLA $188.77 0.00%
YHOO $44.44 0.00%


DOW 17,776.12 -200.19 -1.11%
S&P 500 2,067.89 -18.35 -0.88%
NASDAQ 4,900.8850 -46.5560 -0.94%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs