Morningstar Inflation Focus

SPECIAL FEATURE: Inflation-fighting tools and portfolio strategies from Morningstar Team, 15 August, 2011 | 3:43PM
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The Office for National Statistics on Tuesday revealed prices in the U.K. increased at an annual pace of 4.4% in July, as measured by CPI, or by 5.0% using the RPI measure. Like most consumers, you've undoubtedly felt the sting of inflation at the petrol pump and in supermarkets in recent months. But as uncomfortable as a short spike in prices can be, over the longer term, the milder inflation we typically see can be even more brutal.

Compounded over many years, inflation can actually be an enormous swing factor. For example, accounting for an inflation rate of 3.5% can more than double the amount that a 50-year-old investor needs to sock away for retirement.

This week Morningstar's analysts and strategists, along with several outside experts, weighed in on the inflation picture today. We've been discussing whether investors need to be making inflation-specific moves in their portfolios, the tools for the job, and how to account for inflationary pressures when calculating retirement withdrawal rates. We've sized up the pros and cons of traditional inflation-fighting tools at investors' disposal and taken a closer look at how investors can construct portfolios to stay ahead of the scourge of higher prices.

The Lay of the Land
Is CPI an Effective Measure of Inflation? Not all inflation rate statistics tell the same story.

Rising U.K. Inflation: What the Experts Say Price inflation in the U.K. was more than double the Bank of England's target yet again in July--what does this mean for consumers?

Protecting Your Portfolio
Can Your Retirement Cope with Inflation? The prospect of rising costs is a huge swing factor when setting savings targets for your golden years.

Inflation-Adjusting Your Retirement-Portfolio Withdrawals Getting this calculation right can help ensure that you keep up with cost-of-living increases but don't outlive your savings.

Tools of the Trade
Simple Ways to Inflation-Protect Your Portfolio As part of our Inflation Focus, we outline direct and indirect ways to hedge against higher prices.

Picking Stocks for Insulation Against Inflation Look for these key characteristics when shopping for inflation-beating stocks.

ETP Investing for U.K. 'Stagflation' Investors looking to overweight inflation-fighters and non-cyclical equities can do so via exchange-traded products.

Is a Free-Ranging Bond Fund Right for You? Morningstar's Eric Jacobson discusses the history and re-emergence of flexible bond funds and offers tips on incorporating them into a portfolio.

Inflation-Protection Tools Beyond the Obvious Morningstar Investment Services' Marta Norton discusses incorporating real estate, commodities, high-yield and global exposure to broaden inflation protection.

Advisers' Corner
Build a Third Pillar for Inflation Protection Investors should assemble a diversified portfolio of inflation hedges to provide a third pillar to their traditional allocations to stocks and bonds, says Research Affiliates chairman Rob Arnott.

IFA Insights: How to Tackle Inflation Three experienced financial advisers help us understand how to reconcile inflation protection with broader investment goals.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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