3 ETFs to Protect Your Portfolio from Inflation

If you're looking to protect your investments from the pernicious effects of inflation, it would be wise to consider ETFs that invest in UK inflation-linked government bonds

Jose Garcia Zarate 14 February, 2013 | 12:00AM
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Inflation is one of the most pernicious forces faced by investors. Commonly described as a stealth tax; inflation chips away at investment returns. As such, one of the most basic rules of investment portfolio construction is that of making adequate provisions against it.

For a sterling-based investor, the basic building block of an inflation-beating strategy is likely to come in the shape of UK inflation-linked government bonds

UK investors have been made particularly aware of such a need in the past few years as inflation has run well above the Bank of England’s (BoE) price stability target of 2.0%. Despite a gradual slide from the multi-decade highs of late 2011, UK inflation, as measured by the consumer price index (CPI), still remains above target. Moreover, the consensus expectation is for inflation to remain above target for a protracted period. 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
iShares £ Index-Lnkd Gilts ETF GBP Dist21.08 GBP0.61

About Author

Jose Garcia Zarate

Jose Garcia Zarate  is Associate Director of Passive Strategies Research for Morningstar Europe