Five Assets for Hedging Against Dollar Inflation or Deflation

photo.cmsAs the stock markets continue to recover (assuming it has not done yet), the talk of inflation is coming back in the news. Our government has pumped in so much of printed money in the system that there is a concern that US economy will experience inflationary times. There is no denying that inflation will take away chunk of our real returns from overall investing returns.

Many of the well known economists and investors (including Warren Buffett) have expressed concerns about inflation. Among all the experts and pundits, I believe, David Swensen gave a very pragmatic and down to earth response to this question in an interview on WealthTrack. According to Swensen, he does not know what will happen. He cannot predict it. There will be inflation if the recent pumping of money supports the economy and growth returns to US economy. If there is no growth, then there will be deflation of dollar value. His message was to address these issues with proper diversification and asset allocation. As individual investors what can we do to (or rather how can we) blunt the effect of inflation or deflation. Following are five aspects one can look into to manage their asset diversification.

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Commodity Asset Class in Dividend Growth Portfolio

One of basic tenets of portfolio construction is following the principles of asset allocation. This is much more applicable and valid for do-it-yourself individual investors. In this context, at a minimum, I need to look at and at least consider evaluating all possible asset classes. While doing this, I also have to keep in mind that my portfolio is based on dividend growth philosophy. Among others, a commodity is also one asset class which I believe I should be investing. The next question is what should be my investing vehicle.

Since 2001, quite a few commodity index based Exchange Trade Funds (ETF) and Exchange Traded Notes (ETN) were introduced in the market. There are more than 30 commodity ETFs/ETNs of various flavors based on agriculture, raw metals, coal, water, oil, natural gas, gold, silver, different combinations of these in index format, etc. And how can we forget, the biggest sham of all investment vehicles, futures-based index ETFs/ETNs. My viewpoint is, futures-based index are just designed for speculation. As it always happens, during the speculative boom of late 2007 and early 2008, every month a commodity ETF or ETN was launched in market in one form or other. continue reading rest of the article….

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