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Shopping for Inflation Hedges
CNBC.com | October 03, 2011 | 09:47 AM EDT

With inflation still looming as an economic wild card, investors are taking a closer look at asset classes that traditionally outperform as consumer prices rise.

None more so than retirees.Without a salary, or new sources of income, inflation can hit the senior set (who invest heavily in fixed-income securities) especially hard, eroding both purchasing power and their standard of living.

“The inflation rate for seniors is always higher because of health-care costs, which make up a bigger portion of their budget, and have risen by about 5.4 percent a year over the last 30 years,” says Matt Schott, vice president of retirement income practice for the Financial Research Corp. in Boston.

Of late, the consumer price index, CPI , which tracks the price of goods and services, has been all over the board.

After its most recent peak of 5.6 percent in July 2009, it plunged to negative territory (2.1 percent) a year later. And it’s been trending higher ever since, thanks to the rising cost of food and fuel—hovering today at around 3.8 percent.

While many economists say inflation is not a near-term threat in the U.S. ,indirect pressure could cause the price of household staples (such as milk and clothes) to continue to rise, says Christine Benz, director of personal finance for mutual fund tracker Morningstar.

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