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Inflation. An old friend about to return.

The last few years have been low inflation ones, but with the present mortgage and credit market turmoil, the Federal Reserve has been forced to put more money in circulation and lower the discount rate.

I think this will lead to an upward push on inflation in our country. How do you protect yourself? I think one way is to buy U.S. Treasury inflation protection bonds or "TIPS" as they are referred to. They are U.S. Treasury obligations comparable to regular treasury bonds. The stated interest rate is less than regular treasuries, however the rate of inflation is added to the principle of the bond annually. They come in various maturities and can be bought in 3 ways:

Buy the bonds directly through your broker.
Buy a mutual fund which owns only these securities. Vanguard and Fidelity are two large fund families who offer these type of funds. There are others as well. The thing to look for is the lowest cost to own, i.e., management fees and expenses charged by the fund.
Buy an ETF (Exchange Traded Fund) which owns only these investments. There are several and have the liquidity of exchange traded stocks.

I am kind of partial to choice number 2. Mutual funds are low cost, offer dividend reinvestment, and have a ladder of maturities.

Remember, these are not anything but a hedge against a big rise in our inflation rates. It makes sense as a portion of your investment portfolio. Check with your financial professional to get more information.

Through the combination of Christian money management through Christian financial counseling, and a thorough knowledge of today's Christian investing opportunities, we can learn to be good stewards of God's money.

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