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.
Best 4 Inflation-Protected Bond Mutual Funds for Your Portfolio
Read MoreHide Full Article
Prices that Americans paid for goods and services increased at the fastest pace last month in more than three years, led by higher energy costs. Food, rent and medical costs were also largely costly. Barclays PLC (BCS - Free Report) noted that the consumer price index (CPI) data from April have strengthened the view that core inflation will continue to increase at more than 2% in 2016 and 2017.
A fact that is not to be overlooked is that producer prices too gained for the first time in April in three months. As inflation has begun to build up steadily, we have selected five mutual funds that will protect investors from a rise in prices of essential goods and commodities.
Record Rise in Consumer Prices
According to the Labor Department, CPI increased 0.4% in April, the biggest gain since Feb 2013. This surge in consumer prices took the year-over-year increase to 1.1% in April, up from 0.9% in March.
Stripping out the volatile category such as food and energy prices, the so-called core CPI also advanced 0.2% in April after gaining 0.1% in March. Over the past one year, core prices went up 2.1%. This resulted in a fifth successive month of annual growth above the 2% mark, the longest such streak in four years.
The core CPI was boosted by housing and medical costs. The cost of rent increased 0.3%, while medical costs rose 0.3%. Cost of prescription drugs shot up 0.7%, as did the cost of hospital services, which saw an uptick of 0.3%.
Higher Energy Prices
Rise in consumer prices in April stemmed from a surge in energy prices that included an 8.1% spike in gasoline. This rise in gasoline prices in April followed a 2.2% increase in March. Energy prices jumped 3.4% last month, mainly on the back of higher oil prices.
It seems that the deep rout in the price of oil that took place in mid-February seems to be behind us, which should drive consumer prices further north. As on May 26, 2016, oil prices briefly traded above the psychologically important $50 per barrel level for the first time since October. Oil traded at a seven-month high as the Energy Information Administration (EIA) reported a big inventory draw. The EIA report revealed that crude inventories decreased by 4.23 million barrels for the week ended May 20, 2016, following a rise of 1.31 million barrels in the previous week.
To add to the positive sentiment, The Goldman Sachs Group, Inc. (GS - Free Report) reversed its bearish bet and raised its oil price forecast to $51 a barrel by the end of the year. Just a few months back, Goldman had projected that oil prices would remain around $20 per barrel following crude oversupply (read: 4 Energy Mutual Funds to Buy as Oil Prices Move North).
Producer Prices Increases
Along with consumer prices, U.S. manufacturers, farmers and other producers’ prices rose in April for the first time since January. The producer price index that measures the price changes before they reach the consumer ticked up 0.2% in April. This was in contrast to the declines in March and February.
Higher cost of gas, steel and medicines lifted producer prices. Wholesale gas prices, cost of some types of steel and pharmaceutical costs last month increased 5.5%, 22.1% and 1%, respectively. Excluding the volatile food and energy costs, producer prices advanced 0.1% in April.
Top 4 Inflation-Protected Bond Mutual Funds to Buy
In this situation, where a steady rise in prices of goods and services are threatening to shrink 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, while at the same time provide steady returns.
We have selected four inflation-protected bond mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy), have positive year-to-date and 5-year annualized returns, minimum initial investments within $5000 and carry a low expense ratio. Funds have been selected over stocks, since funds reduce transaction costs for investors and also diversify their portfolio without the numerous commission charges that stocks need to bear.
Vanguard Inflation-Protected Securities Investor (VIPSX - Free Report) invests the majority of its assets in inflation-indexed bonds issued by the U.S. government. VIPSX’s year-to-date and 5-year annualized returns are 4.4% and 2.3%, respectively. VIPSX carries a Zacks Mutual Fund Rank #1 and the annual expense ratio of 0.2% is lower than the category average of 0.76%.
BlackRock Inflation Protected Bond Service invests a large portion of its assets in inflation-indexed bonds of varying maturities issued by the U.S. and non-U.S. governments. BPRSX’s year-to-date and 5-year annualized returns are 3.6% and 1.6%, respectively. BPRSX carries a Zacks Mutual Fund Rank #2 and the annual expense ratio of 0.75% is lower than the category average of 0.76%.
Fidelity Inflation-Protected Bond invests a major portion of its assets in inflation-protected debt securities of all types. FINPX’s year-to-date and 5-year annualized returns are 4.2% and 1.9%, respectively. FINPX carries a Zacks Mutual Fund Rank #2 and the annual expense ratio of 0.45% is lower than the category average of 0.76%.
T. Rowe Price Inflation ProtectedBond (PRIPX - Free Report) invests a large chunk of its net assets in inflation-protected bonds. The emphasis will be on bonds issued by the U.S. Treasury. PRIPX’s year-to-date and 5-year annualized returns are 3.8% and 1.9%, respectively. PRIPX carries a Zacks Mutual Fund Rank #1 and the annual expense ratio of 0.5% is lower than the category average of 0.76%.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Pick the best mutual funds with the help of Zacks Rank.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Best 4 Inflation-Protected Bond Mutual Funds for Your Portfolio
Prices that Americans paid for goods and services increased at the fastest pace last month in more than three years, led by higher energy costs. Food, rent and medical costs were also largely costly. Barclays PLC (BCS - Free Report) noted that the consumer price index (CPI) data from April have strengthened the view that core inflation will continue to increase at more than 2% in 2016 and 2017.
A fact that is not to be overlooked is that producer prices too gained for the first time in April in three months. As inflation has begun to build up steadily, we have selected five mutual funds that will protect investors from a rise in prices of essential goods and commodities.
Record Rise in Consumer Prices
According to the Labor Department, CPI increased 0.4% in April, the biggest gain since Feb 2013. This surge in consumer prices took the year-over-year increase to 1.1% in April, up from 0.9% in March.
Stripping out the volatile category such as food and energy prices, the so-called core CPI also advanced 0.2% in April after gaining 0.1% in March. Over the past one year, core prices went up 2.1%. This resulted in a fifth successive month of annual growth above the 2% mark, the longest such streak in four years.
The core CPI was boosted by housing and medical costs. The cost of rent increased 0.3%, while medical costs rose 0.3%. Cost of prescription drugs shot up 0.7%, as did the cost of hospital services, which saw an uptick of 0.3%.
Higher Energy Prices
Rise in consumer prices in April stemmed from a surge in energy prices that included an 8.1% spike in gasoline. This rise in gasoline prices in April followed a 2.2% increase in March. Energy prices jumped 3.4% last month, mainly on the back of higher oil prices.
It seems that the deep rout in the price of oil that took place in mid-February seems to be behind us, which should drive consumer prices further north. As on May 26, 2016, oil prices briefly traded above the psychologically important $50 per barrel level for the first time since October. Oil traded at a seven-month high as the Energy Information Administration (EIA) reported a big inventory draw. The EIA report revealed that crude inventories decreased by 4.23 million barrels for the week ended May 20, 2016, following a rise of 1.31 million barrels in the previous week.
To add to the positive sentiment, The Goldman Sachs Group, Inc. (GS - Free Report) reversed its bearish bet and raised its oil price forecast to $51 a barrel by the end of the year. Just a few months back, Goldman had projected that oil prices would remain around $20 per barrel following crude oversupply (read: 4 Energy Mutual Funds to Buy as Oil Prices Move North).
Producer Prices Increases
Along with consumer prices, U.S. manufacturers, farmers and other producers’ prices rose in April for the first time since January. The producer price index that measures the price changes before they reach the consumer ticked up 0.2% in April. This was in contrast to the declines in March and February.
Higher cost of gas, steel and medicines lifted producer prices. Wholesale gas prices, cost of some types of steel and pharmaceutical costs last month increased 5.5%, 22.1% and 1%, respectively. Excluding the volatile food and energy costs, producer prices advanced 0.1% in April.
Top 4 Inflation-Protected Bond Mutual Funds to Buy
In this situation, where a steady rise in prices of goods and services are threatening to shrink 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, while at the same time provide steady returns.
We have selected four inflation-protected bond mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy), have positive year-to-date and 5-year annualized returns, minimum initial investments within $5000 and carry a low expense ratio. Funds have been selected over stocks, since funds reduce transaction costs for investors and also diversify their portfolio without the numerous commission charges that stocks need to bear.
Vanguard Inflation-Protected Securities Investor (VIPSX - Free Report) invests the majority of its assets in inflation-indexed bonds issued by the U.S. government. VIPSX’s year-to-date and 5-year annualized returns are 4.4% and 2.3%, respectively. VIPSX carries a Zacks Mutual Fund Rank #1 and the annual expense ratio of 0.2% is lower than the category average of 0.76%.
BlackRock Inflation Protected Bond Service invests a large portion of its assets in inflation-indexed bonds of varying maturities issued by the U.S. and non-U.S. governments. BPRSX’s year-to-date and 5-year annualized returns are 3.6% and 1.6%, respectively. BPRSX carries a Zacks Mutual Fund Rank #2 and the annual expense ratio of 0.75% is lower than the category average of 0.76%.
Fidelity Inflation-Protected Bond invests a major portion of its assets in inflation-protected debt securities of all types. FINPX’s year-to-date and 5-year annualized returns are 4.2% and 1.9%, respectively. FINPX carries a Zacks Mutual Fund Rank #2 and the annual expense ratio of 0.45% is lower than the category average of 0.76%.
T. Rowe Price Inflation Protected Bond (PRIPX - Free Report) invests a large chunk of its net assets in inflation-protected bonds. The emphasis will be on bonds issued by the U.S. Treasury. PRIPX’s year-to-date and 5-year annualized returns are 3.8% and 1.9%, respectively. PRIPX carries a Zacks Mutual Fund Rank #1 and the annual expense ratio of 0.5% is lower than the category average of 0.76%.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Pick the best mutual funds with the help of Zacks Rank.