We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
5 Top Inflation-Protected Bond Mutual Funds for High Returns
Read MoreHide Full Article
The latest Fed minutes reveal that majority of policymakers anticipate a spike in inflation this year, driving it to the central bank’s desired target of 2%. January’s wage growth, steady job addition and higher-than-expected consumer prices further validate the anticipations. To top it, another key inflation metric, producer prices posted the highest yearly rise since 2014. Below, we have selected five mutual funds that will protect investors against a spike in inflation.
FOMC Policy Minutes Hint at Higher Inflation
In the minutes for Federal Open Market Committee’s (“FOMC”) policy meeting between Jan 20-21, "majority of participants” stated that a better projection for economic growth increased “the likelihood that further gradual policy firming would be appropriate." Additionally, majority of policymakers expect the key inflation rate to touch Fed’s goal of 2% in the "medium term" mainly because economic growth "remained above trend” and labor market continued to strengthen.
Although, in the Fed survey, out of the 12 districts only a “few” of them confirmed that companies in those districts have sufficient purchasing power, expectation over key inflation metric still remained favorable. In fact, in the Fed minutes, the index for core personal consumption expenditure (PCE) is expected to “rise notably faster this year” from 1.5% posted last December.
The Fed found little evidence up to their meeting about a sector-wide increase in wage growth. However, the Fed’s meeting was closely followed by strong jobs data, which reflected a year-over-year pickup in wage growth. The strong CPI and PPI data that were released after the FOMC meeting also raised expectations of higher inflation.
Wage Growth Best Since 2009; CPI, PPI Rally Higher
The Bureau of Labor Statistics reported that the U.S. economy added a total of 200,000 jobs in the month of January, more than the consensus estimate of 183,000. Also, average hourly earnings rose 0.3% and registered yearly average of 2.9%, the highest since June 2009. Meanwhile, the unemployment rate remained at a 17-year low of 4.1%.
The Bureau of Labor Statistics reported that CPI and core-CPI gained 0.5% and 0.3%, respectively, in January. Consumer inflation index saw its highest increase in five months. Further, the U.S. Bureau of Labor Statistics reported that Producer Price Index (PPI) rose 0.4% last month and registered year-over-year increase of 2.7% in January. Also, core-PPI increased 0.4% in January and advanced 2.5% year over year in January, registering the best growth since August 2014.
5 Inflation-Protected Bond Mutual Funds to Buy
In this circumstance, where rising inflation is expected to reduce the value of money, investing in inflation-protected bond mutual funds will be a prudent decision. Such funds can serve as a hedge against inflation and also provide steady returns.
We have selected five inflation-protected bond mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three-year annualized returns. Additionally, the minimum initial investment is within $5000 and net assets are above $50 million. Funds are preferred over stocks since they reduce transaction costs for investors and also diversify their portfolio without the numerous commission charges that stocks charge.
We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely success of the fund.
VALIC Company I Inflation Protected (VCTPX - Free Report) invests a bulk of its assets in inflation-indexed fixed income securities, which are issued by both U.S. and non-U.S. governments and corporations. VCTPX mainly invests in those investment grade bonds that are rated BBB- or better by Standard & Poor's Ratings Services or Baa3 or better by Moody's Investors Service, Inc.
This fund has a history of positive total returns for over 10 years. Specifically, the fund has three-year annualized returns of 1.5%. VCTPX has an annual expense ratio of 0.58%, while the category average is 0.75%. It has a Zacks Mutual Fund Rank #1.
Schwab Treasury Inflation Protected Securities Index (SWRSX - Free Report) aims to track the yield as well as price performance of Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index (Series-L) SM. The fund invests mainly in securities included in the index.
This fund has a history of positive total returns for over 10 years. Specifically, the fund has three-year annualized returns of 1%. It has an annual expense ratio of 0.11%, while the category average is 0.75%. SWRSX has a Zacks Mutual Fund Rank #1.
T. Rowe Price Inflation ProtectedBond (PRIPX - Free Report) invests a large chunk of its net assets in inflation-protected bonds. The fund invests primarily in bonds that are issued by the U.S. Treasury. PRIPX may also invest around one-fifth of its assets in inflation-protected bonds issued by non-U.S. corporations and governments.
This fund has a history of positive total returns for over 10 years. Specifically, the fund has three-year annualized returns of 0.8%. PRIPX has an annual expense ratio of 0.50%, while the category average is 0.75%. It has a Zacks Mutual Fund Rank #2.
MassMutual Premier Inflation-Protected and Income Service (MIPYX - Free Report) invests a huge part of its assets in income-generating securities with a key focus on inflation-indexed bonds. The fund advisor aims to retain a dollar-weighted average credit quality of A or higher.
This fund has a history of positive total returns for over 10 years. Specifically, the fund has three-year annualized returns of 1.2%. It has an annual expense ratio of 0.65%, while the category average is 0.75%. MIPYX has a Zacks Mutual Fund Rank #1.
BlackRock Inflation Protected Bond Fund Investor A (BPRAX - Free Report) invests the majority of its assets in inflation-indexed bonds, which have varying maturities issued by domestic as well as foreign governments, their agencies, and domestic and foreign corporations.
This fund has a history of positive total returns for over 10 years. Specifically, the fund has three-year annualized returns of 0.6%. BPRAX has an annual expense ratio of 0.62%, while the category average is 0.75%. It has a Zacks Mutual Fund Rank #2.
Want key mutual fund info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
5 Top Inflation-Protected Bond Mutual Funds for High Returns
The latest Fed minutes reveal that majority of policymakers anticipate a spike in inflation this year, driving it to the central bank’s desired target of 2%. January’s wage growth, steady job addition and higher-than-expected consumer prices further validate the anticipations. To top it, another key inflation metric, producer prices posted the highest yearly rise since 2014. Below, we have selected five mutual funds that will protect investors against a spike in inflation.
FOMC Policy Minutes Hint at Higher Inflation
In the minutes for Federal Open Market Committee’s (“FOMC”) policy meeting between Jan 20-21, "majority of participants” stated that a better projection for economic growth increased “the likelihood that further gradual policy firming would be appropriate." Additionally, majority of policymakers expect the key inflation rate to touch Fed’s goal of 2% in the "medium term" mainly because economic growth "remained above trend” and labor market continued to strengthen.
Although, in the Fed survey, out of the 12 districts only a “few” of them confirmed that companies in those districts have sufficient purchasing power, expectation over key inflation metric still remained favorable. In fact, in the Fed minutes, the index for core personal consumption expenditure (PCE) is expected to “rise notably faster this year” from 1.5% posted last December.
The Fed found little evidence up to their meeting about a sector-wide increase in wage growth. However, the Fed’s meeting was closely followed by strong jobs data, which reflected a year-over-year pickup in wage growth. The strong CPI and PPI data that were released after the FOMC meeting also raised expectations of higher inflation.
Wage Growth Best Since 2009; CPI, PPI Rally Higher
The Bureau of Labor Statistics reported that the U.S. economy added a total of 200,000 jobs in the month of January, more than the consensus estimate of 183,000. Also, average hourly earnings rose 0.3% and registered yearly average of 2.9%, the highest since June 2009. Meanwhile, the unemployment rate remained at a 17-year low of 4.1%.
The Bureau of Labor Statistics reported that CPI and core-CPI gained 0.5% and 0.3%, respectively, in January. Consumer inflation index saw its highest increase in five months. Further, the U.S. Bureau of Labor Statistics reported that Producer Price Index (PPI) rose 0.4% last month and registered year-over-year increase of 2.7% in January. Also, core-PPI increased 0.4% in January and advanced 2.5% year over year in January, registering the best growth since August 2014.
5 Inflation-Protected Bond Mutual Funds to Buy
In this circumstance, where rising inflation is expected to reduce the value of money, investing in inflation-protected bond mutual funds will be a prudent decision. Such funds can serve as a hedge against inflation and also provide steady returns.
We have selected five inflation-protected bond mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three-year annualized returns. Additionally, the minimum initial investment is within $5000 and net assets are above $50 million. Funds are preferred over stocks since they reduce transaction costs for investors and also diversify their portfolio without the numerous commission charges that stocks charge.
We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely success of the fund.
VALIC Company I Inflation Protected (VCTPX - Free Report) invests a bulk of its assets in inflation-indexed fixed income securities, which are issued by both U.S. and non-U.S. governments and corporations. VCTPX mainly invests in those investment grade bonds that are rated BBB- or better by Standard & Poor's Ratings Services or Baa3 or better by Moody's Investors Service, Inc.
This fund has a history of positive total returns for over 10 years. Specifically, the fund has three-year annualized returns of 1.5%. VCTPX has an annual expense ratio of 0.58%, while the category average is 0.75%. It has a Zacks Mutual Fund Rank #1.
Schwab Treasury Inflation Protected Securities Index (SWRSX - Free Report) aims to track the yield as well as price performance of Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index (Series-L) SM. The fund invests mainly in securities included in the index.
This fund has a history of positive total returns for over 10 years. Specifically, the fund has three-year annualized returns of 1%. It has an annual expense ratio of 0.11%, while the category average is 0.75%. SWRSX has a Zacks Mutual Fund Rank #1.
T. Rowe Price Inflation Protected Bond (PRIPX - Free Report) invests a large chunk of its net assets in inflation-protected bonds. The fund invests primarily in bonds that are issued by the U.S. Treasury. PRIPX may also invest around one-fifth of its assets in inflation-protected bonds issued by non-U.S. corporations and governments.
This fund has a history of positive total returns for over 10 years. Specifically, the fund has three-year annualized returns of 0.8%. PRIPX has an annual expense ratio of 0.50%, while the category average is 0.75%. It has a Zacks Mutual Fund Rank #2.
MassMutual Premier Inflation-Protected and Income Service (MIPYX - Free Report) invests a huge part of its assets in income-generating securities with a key focus on inflation-indexed bonds. The fund advisor aims to retain a dollar-weighted average credit quality of A or higher.
This fund has a history of positive total returns for over 10 years. Specifically, the fund has three-year annualized returns of 1.2%. It has an annual expense ratio of 0.65%, while the category average is 0.75%. MIPYX has a Zacks Mutual Fund Rank #1.
BlackRock Inflation Protected Bond Fund Investor A (BPRAX - Free Report) invests the majority of its assets in inflation-indexed bonds, which have varying maturities issued by domestic as well as foreign governments, their agencies, and domestic and foreign corporations.
This fund has a history of positive total returns for over 10 years. Specifically, the fund has three-year annualized returns of 0.6%. BPRAX has an annual expense ratio of 0.62%, while the category average is 0.75%. It has a Zacks Mutual Fund Rank #2.
Want key mutual fund info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>