Rockbridge Named #81 on CNBC's Top 100 Fee Only Wealth Mgmt Firms List
Aug 14

Hedging Inflation: Comparing Commodity Futures and TIPs

by Daniel Edinger

I have generally recommended the use of Treasury Inflation Protected Securities (TIPs) as a hedge against inflation.  Are Commodity Futures an attractive inflation hedge similar to TIPs?

In a March 2011 article, author Geetesh Bhardwaj, addresses the use of various investments as a hedge against unexpected inflation.  (Let me know if you would like a copy of the paper).  The author differentiates between expected inflation, that is already incorporated into stock and bond prices, and unexpected inflation, that is not reflected in prices of most assets.  Both TIPs and Commodity Futures have a positive correlation to unexpected inflation and are unrelated to expected inflation.   Interestingly, REITs show little or no relationship to unexpected inflation.

One negative of commodity futures is that they can be volatile in price, unlike TIPs, whose value should be more stable.

As an investor wanting to hedge against inflation, a portfolio consisting of stocks, bonds, TIPS certainly makes sense.  Commodity Futures, while intriguing,  probably carry more risk than reward.

You Might Also Like

Other articles filed under Investing

Market Commentary – April 2019

April 24, 2019
Stock Markets Stocks rebounded nicely. Tech stocks (FANGs – Facebook, Amazon, Netflix, Google) after leading the way down in last year’s fourth quarter (off 22%) led stocks back up (up 23%). A global stock portfolio earned about 12% this quarter...
Continue Reading

Long-Term Disability Considerations

April 22, 2019
Many of us are familiar with insurance for your home, auto and life, but the reality is - we don't often know our specific coverages until we need to make a claim.  Insurance has become so specific it’s worthwhile to...
Continue Reading

Where Is The Value?

April 19, 2019
It’s no secret that since the Financial Crisis value stocks have underperformed growth stocks.   Many theories exist as to why this has happened, none of which can be confirmed as truth.  This begs the question “what does this last decade...
Continue Reading

Life Events to Consider

April 17, 2019
If you’re like most people, you know that planning to achieve your financial goals involves more than just budgeting and saving for retirement. You’ve undoubtedly received financial advice, solicited or otherwise, from some combination of family, friends, coworkers, or even...
Continue Reading

New York State Office of Unclaimed Funds

February 8, 2019
Over the summer, we had a client ask if there was a place to look for existing accounts or funds they or family members may have accumulated and forgotten about over the years. That sparked Julie’s memory of the New...
Continue Reading

‹ Back to Blog Home

getting started is simple

315.671.0588 info@rockbridgeinvest.com Schedule a meeting Sign Up for Our Newsletter