15 Best Inflation ETFs to Invest In (Tips, Alternative Investments)
The high inflation rates reported in early 2022 threatened the stock market and global economic growth.
To mitigate the effects of rising inflation, most investors started exploring options such as ETFs (Exchange Traded Funds.)
But, is it worth investing in an inflation ETF?
Let’s take a look at the 15 best ETFs to invest in during inflation, how high inflation affects ETFs, and why fine wine may give you the best investment return compared to ETFs.
Further reading
- Check out this detailed guide that covers Everything About Wine ETFs.
- While you're at it, here are some tips on how to start Investing in Wine.
15 Best ETFs to Invest in During Inflation
Here are the best ETFs worth investment during inflationary times:
- Vanguard Real Estate Index Fund ETF (NYSEARCA: VNQ)
- iShares Silver Trust (NYSEARCA: SLV)
- Vanguard Short-Term Inflation-Protected Securities ETF (NASDAQ: VTIP)
- iShares Core S&P 500 ETF (NYSEARCA: IVV)
- Vanguard Global ex-US Real Estate Index Fd ETF (NASDAQ: VNQI)
- Materials Select Sector SPDR Fund (NYSEARCA: XLB)
- United States 12 Month Oil Fund LP (NYSEARCA: USL)
- Fidelity Stocks for Inflation ETF (BATS: FCPI)
- SPDR Gold MiniShares Trust (NYSEARCA: GLDM)
- Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (NASDAQ: PDBC)
- Quadratic Interest Rate Volatility and Inflation Hedge ETF (NYSEARCA: IVOL)
- Horizon Kinetics Inflation Beneficiaries ETF (NYSEARCA: INFL)
- iShares TIPS Bond ETF (NYSEARCA: TIP)
- Invesco DB Commodity Index Tracking Fund (NYSEARCA: DBC)
- Energy Select Sector SPDR Fund (NYSEARCA: XLE)
1. Vanguard Real Estate Index Fund ETF (NYSEARCA: VNQ)
This ETF (Exchange Traded Fund) invests in stocks that are issued by Real Estate Investment Trusts (REITs.) Like many other real estate ETFs, it’s been performing well despite the current inflationary pressures.
This fund has returned over 8.77% in the past 10 years.
Historical 5-Year Performance
Source: Google Finance
Market Cap: N/A
Net Assets: 78.4B USD
Volume: 7.2M
P/E Ratio: N/A
Dividend Yield: 2.19%
Net Expense Ratio: 0.10%
2. iShares Silver Trust (NYSEARCA: SLV)
This inflation Exchange Traded Fund invests in silver and tracks the metal’s market price performance and total return.
The ETF has returned 4.82% over a 5-year period.
Historical 5-Year Performance
Source: Google Finance
Market Cap: 8.09B USD
Net Assets: 12.1B USD
Volume: 33M
P/E Ratio: N/A
Dividend Yield: 0%
Net Expense Ratio: 0.50%
3. Vanguard Short-Term Inflation-Protected Securities ETF (NASDAQ: VTIP)
This inflation protected bond ETF invests in Treasury Inflation Protected Securities (TIPS.) It has returned 4.16% over a 3-year period.
Historical 5-Year Performance
Source: Google Finance
Market Cap: N/A
Net Assets: 61.72B USD
Volume: 5.4M
P/E Ratio: N/A
Dividend Yield: 2.26%
Net Expense Ratio: 0.04%
4. iShares Core S&P 500 ETF (NYSEARCA: IVV)
This ETF tracks the S&P 500 investment results composed of large-capitalization US equities. So, it makes it easy for you to invest in the largest, well-reputed corporations.
Historical 5-Year Performance
Source: Google Finance
Market Cap: 2.46B USD
Net Assets: 301.01B USD
Volume: 8.7M
P/E Ratio: 2.80
Dividend Yield: 1.31%
Net Expense Ratio: 0.03%
5. Vanguard Global ex-US Real Estate Index Fd ETF (NASDAQ: VNQI)
This ETF is similar to the Vanguard Real Estate ETF, except that it excludes stocks from the United States. Instead, its portfolio comprises about 700 companies from different parts of the world.
So, if you want to invest in real estate, this is one of the best inflation ETFs to consider.
Historical 5-Year Performance
Source: Google Finance
Market Cap: N/A
Net Assets: 4.99B USD
Volume: 324K
P/E Ratio: N/A
Dividend Yield: 0.87%
Net Expense Ratio: 0.12%
6. Materials Select Sector SPDR Fund (NYSEARCA: XLB)
If you want to invest in materials but don’t want to do that directly via commodity futures, then go for this ETF.
The Materials Select Sector SPDR Fund ETF tracks only the best commodity stocks and materials in the stock market. Some of the top holdings in its portfolio include Newmont (a gold miner), Linde (a chemicals company), and Freeport-McMoRan (a copper firm.)
Historical 5-Year Performance
Source: Google Finance
Market Cap: 4.66B USD
Net Assets: 7.54B USD
Volume: 8.3M
P/E Ratio: 6.84
Dividend Yield: 1.69%
Net Expense Ratio: 0.10%
7. United States 12 Month Oil Fund LP (NYSEARCA: USL)
Crude oil usually performs well during inflationary times or when the Federal Reserve Bank raises interest rates. So, investing in an ETF like the United States 12 Month Oil Fund LP could be worth it.
This ETF invests primarily in crude oil futures contracts. From there, it tracks the market price movements of oil in the stock market.
Historical 5-Year Performance
Source: Google Finance
Market Cap: 153.59M USD
Net Assets: 142.22M USD
Volume: 18,025
P/E Ratio: N/A
Dividend Yield: 0%
Net Expense Ratio: 0.90%
8. Fidelity Stocks for Inflation ETF (BATS: FCPI)
The Fidelity Stocks for Inflation ETF invests around 80% of its assets in stocks held by the FCPI Index (Fidelity Stocks for Inflation Factor Index.) The FCPI index reflects the performance of reputed US companies with high valuations.
So, this ETF deserves a spot in your portfolio if you’re looking to combat inflation and rising interest rates.
Historical 5-Year Performance
Source: Google Finance
Market Cap: N/A
Net Assets: 278.43M USD
Volume: 74K
P/E Ratio: N/A
Dividend Yield: 2.60%
Net Expense Ratio: 0.29%
9. SPDR Gold MiniShares Trust (NYSEARCA: GLDM)
The SPDR Gold MiniShares Trust ETF offers investors a cost-effective way to invest in gold indirectly. It allows you to buy gold shares through the SPDR Gold MiniShares Trust ETF.
Historical 5-Year Performance
Source: Google Finance
Market Cap: N/A
Net Assets: 5.15B USD
Volume: 4.9M
P/E Ratio: N/A
Dividend Yield: 0%
Net Expense Ratio: 0.10%
10. Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (NASDAQ: PDBC)
If you want to diversify your portfolio and reduce your risk of loss, this is one of the best commodity ETFs to consider. It helps you invest in various commodities like oil, gold, copper, and more.
Historical 5-Year Performance
Source: Google Finance
Market Cap: N/A
Net Assets: 9.28B USD
Volume: 7.02M
P/E Ratio: N/A
Dividend Yield: 0.17%
Net Expense Ratio: 0.62%
11. Quadratic Interest Rate Volatility and Inflation Hedge ETF (NYSEARCA: IVOL)
This inflation protected bond ETF invests in a combination of various TIPS.
It helps you tackle both declining and rising interest rates. So, it’s tailor-made to help combat all kinds of inflationary pressures.
So, whether inflation declines or rises, this ETF could provide the best returns.
Historical 5-Year Performance
Source: Google Finance
Market Cap: N/A
Net Assets: 1.6B USD
Volume: 438K
P/E Ratio: N/A
Dividend Yield: 5.63%
Net Expense Ratio: 1.05%
12. Horizon Kinetics Inflation Beneficiaries ETF (NYSEARCA: INFL)
The Horizon Kinetics Inflation Beneficiaries ETF invests primarily in companies that benefit from rising inflation. It holds more than $1 billion in assets, so there’s liquidity when you want to buy or sell shares.
It’s definitely one of the best inflation ETFs that deserve a spot in your portfolio.
Historical 5-Year Performance
Source: Google Finance
Market Cap: N/A
Net Assets: 1.44B USD
Volume: 933K
P/E Ratio: N/A
Dividend Yield: N/A
Net Expense Ratio: 0.85%
13. iShares TIPS Bond ETF (NYSEARCA: TIP)
The iShares TIPS Bond ETF tracks the investment results of the best US inflation-protected Treasury bonds.
This bond ETF gives you access to some of the best TIPS whose value appreciates as inflation rises.
Historical 5-Year Performance
Source: Google Finance
Market Cap: 20.30B USD
Net Assets: 31.86B USD
Volume: 3.2M
P/E Ratio: 13.14
Dividend Yield: 12.36%
Net Expense Ratio: 0.19%
14. Invesco DB Commodity Index Tracking Fund (NYSEARCA: DBC)
This ETF invests in materials via futures contracts. In fact, it has a portfolio of the 14 most traded commodity futures contracts, including metals, agricultural products, and oil.
It’s one of the best commodity ETFs to consider if you want to invest in materials.
Historical 5-Year Performance
Source: Google Finance
Market Cap: 2.83B USD
Net Assets: 4.68B USD
Volume: 3.2M
P/E Ratio: 7.31
Dividend Yield: 0%
Net Expense Ratio: 0.85%
15. Energy Select Sector SPDR Fund (NYSEARCA: XLE)
This bond ETF is similar to the Materials Select Sector SPDR Fund, except that it focuses on oil. It invests in about 20 of the largest and best stocks in the energy sector.
It could be the best investment if you’re looking for Exchange Traded Funds that focus on rising energy prices.
Historical 5-Year Performance
Source: Google Finance
Market Cap: 15.38B USD
Net Assets: 42.25B USD
Volume: 31.3M
P/E Ratio: 4.75
Dividend Yield: 2.54%
Net Expense Ratio: 0.10%
How Does Inflation Affect ETFs?
Most inflation Exchange Traded Funds comprise stocks that usually benefit from inflation. This includes asset class types such as real estate, mining, and transportation.
For example, a Treasury Inflation Protected Securities ETF (TIPS ETF) is indexed to inflation. So, investing in it involves low risk and guarantees the best total return.
What is a TIPS ETF?
Simply put, TIPS are bonds whose principal value is indexed to the inflation rate and the Consumer Price Index (CPI.) When the Consumer Price Index rises or the Federal Reserve Bank increases the inflation rate, the principal value is also increased.
So, a TIPS ETF can combat inflationary pressures and could be an excellent investment.
Although inflation above 2% might not affect most stock and bond fund returns, it might have detrimental effects on some asset class types. For example, it could harm stocks like Consumer discretionary equities ETFs and Communications equities ETFs.
Why Fine Wine May Be a Better Investment Than ETFs During Inflation
ETFs such as the UCITS ETF, Amplify Inflation Fighter ETF, or the VanEck Inflation Allocation ETF might be profitable investments during high inflation periods. However, their performance is inconsistent.
Just like fixed income securities and other stocks, ETFs can be quite volatile during economic turmoil.
Meanwhile, an asset like fine wine is less volatile and usually outperforms ETFs and other global equities. In the past 15 years, fine wine has produced around 13.6% annual returns (despite economic downturns.)
So, if you want to offset inflation expectations, an asset like fine wine deserves a spot in your investment portfolio.
Check out the Vinovest website today to start your fine wine investment journey. After signing up with Vinovest, an expert will give you the best investment advice so you can pick only the finest bottles.
Should You Really Invest in ETFs During Inflation?
It’s always a good idea to pick profitable investments during rising inflation periods. Most investors protect their portfolios by investing in ETFs such as the UCITS ETF, Amplify Inflation Fighter ETF, or the VanEck Inflation Allocation ETF.
However, an asset like fine wine usually offers the best investment return compared to ETFs, fixed income securities, and other stocks.
So, Visit the Vinovest website to get the best investment advice and build a profitable portfolio. This platform makes it easy for you to buy, store, and sell the world’s best investment-grade wines.
