5 Commodity ETFs (and 1 Stock) to Hedge Against Inflation
As inflation fears rise, so are commodity prices. Here are five commodity ETFs (and one stock) to hedge against a diminished dollar.
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Here at Cabot Investing Advice, our primary focus is stocks. But exchange-traded funds—more commonly known by their abbreviation, ETFs—can also be an efficient, profitable place to invest your money.
What is an ETF?
It’s an investment fund that trades on a public stock exchange just like a stock. ETFs hold dozens and even hundreds of stocks, commodities or bonds, so you get the safety of diversification. In that way, they’re like mutual funds.
Because they are “unmanaged,” however—you might say they run on autopilot—ETFs entail lower annual fees than comparable index-based mutual funds, and far lower fees than actively managed mutual funds. And unlike mutual funds, which are priced once a day after the market closes, ETFs are traded throughout the day just like regular stocks, so you can buy or sell them whenever you want, and when you buy, you get exactly the price quoted when you buy.
Now, of the more than 1,400 ETFs available, many are designed to mimic the performance of major indexes. You can buy indexes that duplicate the performance of the S&P 500 and the Dow Industrials. You can also buy indexes that mimic lesser-known indexes like the S&P Emerging Markets Small Cap Index and the Dow Jones Small Cap Value Index.
Those are fine for investors who are content to just do as well as the averages.
But if you want to beat the averages, you’ve got to specialize. And for that, you need sector ETFs, which allow you to invest precisely in the economic sectors you think are most likely to bring the biggest gains.
We recommend ETFs when we feel more strongly about the sector than we do about any individual stock, or when we feel there is too much risk in any one stock, yet we still want to participate in the sector.
We also might buy an ETF if we were very confident about a bull or bear market move and wanted to leverage the move by using an ETF that aimed for double the market’s move. Our resident growth stock expert, Mike Cintolo, will occasionally invest in a major index—say, the S&P 500, by buying the SPDR S&P 500 ETF (SPY)—when he thinks it’s about to start a major upmove.
There are some instances when investing in ETFs makes sense—whether it’s gaining maximum exposure to a red-hot sector, gaining access to an entire country’s stock market, or simply taking advantage of a bull market. In general, we don’t recommend buying and holding them the way you would a stock with long-term growth potential. But there’s money to made in ETFs if you time it right.
As inflation fears rise, so are commodity prices. Here are five commodity ETFs (and one stock) to hedge against a diminished dollar.
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Does an agriculture ETF belong in your portfolio? And if so, how do you find the right one? Here are a couple options.
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Gold prices have been in decline despite the weakened dollar. What will it take for the yellow metal to shine again?
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The push to electric vehicles and alternative energy has put green stocks squarely in Wall Street's focus. Here are six ways to play it.
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After years of under-funding, a U.S. infrastructure boom is coming. Here are four stocks and ETFs that stand to benefit most from it.
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Relative Performance is a powerful tool for finding market leaders in any trading conditions. Here are three ETFs heading into 2021 strong.
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After the recent massive cyberattack on the U.S. government, it's time to invest in cybersecurity. Here are the two best ways to do it.
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Rapid recovery in the automotive and construction industries has led to a base metals boom. Buy these four base metal ETFs to take advantage.
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Marijuana stocks are poised for a banner 2021, and likely beyond. To gain access to that rally, the Alternative Harvest ETF is your best bet.
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Food might be a consumer staple, but does that mean a food ETF can serve up winning numbers in your portfolio? Maybe not.
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