How to protect yourself from inflation with ETFs? We analyze 4 products to evaluate in the context of increasing market prices.
The current economic scenario is characterized by growing inflationary pressure and has given rise to growing concern. Constantly rising prices of goods and services can erode the purchasing power of money, putting the value of your life’s savings and investments at risk.
To protect themselves from inflation, many investors turn to ETFs that track specific indices or strategies to mitigate the impact of inflation on their portfolio.
In this article, we will look at some inflation-protected ETFs available in the market. These ETFs offer investors the opportunity to preserve their purchasing power and maintain a more resilient portfolio in a rising inflation environment.
Why Inflation ETFs Matter
Before looking at specific ETFs, it’s important to understand why they are crucial during periods of inflation. When inflation rises, the real value of your investments in stocks, bonds, and cash may decline. Inflation-protected ETFs are designed to protect investors from this erosion of purchasing power. These ETFs, in fact, invest in assets that have historically proven to be more resilient than others to inflation, such as gold, real estate, inflation-linked securities and shares of companies operating in defensive sectors.
Here are some inflation-protected ETFs to consider:
1. iShares Physical Gold ETC
The iShares Physical Gold ETC offers investors efficient and cost-effective access to the gold market by faithfully replicating price action in US dollars, without currency hedging, through physical replication of the precious metal. With an annual total expense ratio (TER) of 0.12%, it is one of the most affordable ETCs available on the market, gaining exposure to this safe haven asset without having to bear excessive costs. With assets under management of $14,382 million, this ETC is considered one of the largest of its kind, providing investors with greater liquidity and stability.
2. The Lyxor EUR 2-10Y Inflation Expectations UCITS ETF - Acc
This ETF represents a specialized investment vehicle, aimed at replicating the performance of the iBoxx® EUR Breakeven Euro-Inflation France & Germany index. This index, in turn, tracks equilibrium inflation resulting from a long position on inflation-linked bonds issued by the French and German governments, and a short position on French and German government bonds with similar durations.
The ETF has an annual total expense ratio (TER) of 0.25%, making it an accessible choice for investors looking to gain exposure to this strategy. It is important to note that the Lyxor EUR 2-10Y InflationExpectations UCITS ETF - Acc is the only exchange-traded fund that tracks the iBoxx® EUR Breakeven Euro-Inflation France & Germany index, giving this ETF a unique position of its kind.
Replication of the performance of the underlying index is achieved through a synthetic structure, which uses a swap. Additionally, the interest generated by the underlying assets is accumulated and reinvested in the ETF, helping to maximize potential long-term returns.
With assets under management of $604 million, the ETF represents a significant size. Launched on 13 April 2016 and with tax domicile in Luxembourg, this ETF offers an option for those looking to take advantage of inflation trends in a diversified portfolio context.
3. iShares European Property Yield UCITS ETF EUR (Acc)
The iShares EuropeanProperty Yield UCITS ETF EUR (Acc) represents an investment vehicle aimed at replicating the performance of the FTSE EPRA/NAREIT Developed Europe index. This index, in turn, provides a broad overview of the European real estate market in developed countries, including both equity REITs and listed real estate companies. This offers investors a diversified representation both in terms of property type and geographic positioning.
The ETF has an annual total expense ratio (TER) of 0.40%, making it an accessible option for those seeking exposure to the European real estate market, but more expensive than its predecessors. The index replication strategy is based on full physical replication, which means that the ETF purchases all components of the underlying index. Additionally, dividends generated by the underlying assets are accumulated and reinvested in the ETF, helping to maximize potential returns for investors.
With assets under management of $327 million, this ETF represents a significantly sized option. With an accumulation distribution policy, the ETF allows investors to benefit from the appreciation of the ETF’s value over time, without the need to receive periodic distributions. However, it is important to keep in mind that this ETF has an annual volatility of 25.45% in Euros, which can lead to high variability in returns.
4. SPDR S&P Euro Dividend Aristocrats UCITS ETF (Dist)
The SPDR S&P Euro DividendAristocrats UCITS ETF (Dist) offers investors targeted exposure to the European equity market by tracking the S&P Euro High Yield Dividend Aristocrats Index. This index carefully selects Eurozone companies that have demonstrated dividend growth over a rolling 10-year period, giving investors access to a group of companies with a solid track record of paying dividends.
The ETF has an annual total expense ratio (TER) of 0.30%, making it a cost-efficient choice for investors looking for exposure to this segment of the European stock market. Index replication is achieved through a full physical replication strategy, meaning the ETF purchases all components of the underlying index. Dividends generated by the underlying assets are distributed to investors on a semi-annual basis, providing a regular income stream.
With assets under management of $1,205 million, this ETF is considered very large in size. This ETF’s annual volatility of 13.78% reflects the dynamic nature of the European stock market.
|Disclaimer
The information and considerations contained in this article should not be used as the sole and principal basis on which to make investment decisions. The reader retains full freedom in his own investment choices and full responsibility in making them since he alone knows his risk appetite and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation for public savings.|
Original article published on Money.it Italy 2023-10-21 08:14:00. Original title: Gli ETF per proteggersi dall’inflazione
