US Videos

A Strong Inflation Hedge From Vanguard

Alfonzo Bruno, CFA

Alfonso Bruno: Inflation-protected securities offer investors an effective hedge against inflation relative to traditional asset classes, such as stocks and bonds. Despite a lengthy U.S. recovery and historically low unemployment, inflation has remained stubbornly below that of the Federal Reserve’s 2% inflation target. This problem is only exacerbated when looking globally at other developed markets such as the eurozone and Japan, for example. Still, given that every investor is exposed to inflation, we believe that having a modest allocation to inflation-protected securities makes sense in many portfolios.

For this year to date through February 2019, the inflation-protected Morningstar Category is up 1.6%. Within that, Vanguard Inflation-Protected Securities fund is an excellent choice for investors looking for an inflation hedge. Unlike category peers, the fund will stay true to its Bloomberg Barclays U.S. Treasury Inflation Protected Index, despite an active approach, and does not court additional risk in areas like corporate bonds or commodities, for example. The fund’s extremely low fees and Vanguard's excellent stewardship solidify this fund’s place among the best within the category.