Inflation-Beating Investments for Retirement, a poorly timed article on BankRate.
Posted: December 19th, 2008 | Author: Joe | Filed under: Economy, Investing | Tags: Inflation, Investing | No Comments »
Unless you outpace inflation, it can destroy your savings.
BankRate.com has a poorly timed article titled: Inflation-Beating Investments for Retirement
I say it’s poorly timed because with the U.S. in what will likely be a pretty severe recession, high inflation is an unlikely risk. Especially since energy prices are down around 65% from there recent highs. High oil and the ethanol debacle have waned, and so has inflation. In fact, there’s been a ton of articles making the rounds on the new fear: deflation.
Still, that doesn’t mean it’s a bad article, and inflation is a big worry when it comes to retirement since you will no longer be able to count on receiving a cost of living raise to help outpace inflation.
Their list of Inflation-Beating Investments:
- Treasury-Inflation Protected Securities (TIPS).
- I Bonds.
- Dividend-Rich Stocks.
- Exchange-traded funds, or ETFs.
- Mutual Funds
Personally, I find the last three to be deceptively identical. They are all targeting stocks, which is the best bet for long term outpacing of inflation. The devil is in the details, since both Mutual Funds and ETFs carry some additional expenses. In the end, I think the Mutual Funds and ETFs options are virtually identical in terms of beating inflation and they probably offer Mutual Funds for people who aren’t familiar or comfortable with ETFs.
Of course, you can go further and say you don’t need Dividend-Rich Stocks either, since there are ETFs that cover these like, iShares Dow Jones Select Dividend Index (DVY), PowerShares International Dividend Achievers (PID) and PowerShares HighYield Dividend Achievers (PEY).
I suppose a simple, inflation beating portfolio would have TIPS, I Bonds and some combination of the above ETFs. Of course, allocation percentages within each is another matter entirely 
Check out the BankRate article for more info on the pros and cons of each inflation beating investment.
Photo by darkmatter.
