Nine inflation-protected ETFs to consider amid skyrocketing prices

Highlights

  • As inflation concerns hover, some investors turn to inflation-protected ETFs.
  • ETF funds netted over US$647.8 billion in the third quarter this year, as per ETF.com.

  • The inflow was US$66.8 billion in August, while in September, it fell to US$55.5 billion.

Inflation has hit the pockets of average Americans, and there appears no immediate relief from the rising consumer prices. Prices of various commodities and services from oil, cars, household items to medical care have skyrocketed, leaving many American households helpless.

According to the government data, the annual inflation rate fell slightly to 5.3% in August from a 13-year high of 5.4% in June and July. Meanwhile, the September inflation data is expected to be out on Wednesday. Analysts expect inflation to remain high.

The question is how to use the funds optimally in times of inflation and volatility. Some investors turn to stock markets to make quick money to beat inflation. But, although there is a high risk, one may see some decent returns if invested wisely. Other avenues may seem less attractive as they may require close involvement, and returns may come slowly.

Hence, some investors explore the Treasury Inflation-Protected Securities (TIPS) ETFs or TIPS. These are exchange-traded funds and invests in US Treasury securities that guarantee a fixed income. Besides, these securities are linked to inflation, meaning when inflation rises, so does the security price.

Here we explore the top nine ETFs based on the highest asset under management, as per etf.com.

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iShares TIPS Bond ETF -- (TIP)

This ETF tracks US Treasury inflation-protected securities that have at least one year remaining for maturity. The index is tracked on a market-value-weighted basis. The exchange-traded fund uses Bloomberg US Treasury Inflation-Protected Notes (TIPS) as a tracking index.

It was launched in 2003 by Blackrock. It is an open-ended fund.

Expense ratio - 0.19%. 

Asset Under Management (AUM) - US$34.35 billion 

Average Daily Dollar Volume - US$451.96 million 

Average Daily Share Volume - 3,513,238

Total holdings - 50

Yield to Maturity (YTM) - 0.89%

The ETF gave a 0.12% return YTD, based on the closing price of US$127.70 on Oct 11.

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Inflation ETFs, TIPS, Treasury Inflation-Protected Securities.

Source – pixabay

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Schwab U.S. TIPS ETF -- (SCHP)

The ETF tracks US Treasury securities with at least one year remaining for maturity. The inflation-protected securities are tracked on a market-value weighted index. The tracking index is Bloomberg US Treasury Inflation-Protected Notes (TIPS).

The ETF offers liquidity with a smaller unit price. It was started in 2010 by Charles Schwab and is an open-ended exchange-traded fund.

Expense ratio - 0.05%. 

Asset Under Management (AUM) - US$20.15 billion 

Average Daily Dollar Volume - US$152.89 million 

Average Daily Share Volume - 2,426,159

Total holdings - 45

Yield to Maturity (YTM) - 0.91%

Its YTD return is 0.72%. The ETF closed at US$62.45 on Oct 11, 2021.

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Vanguard Short-Term Inflation-Protected Securities -- (VTIP)

The ETF tracks the index of US Treasury Inflation-Protected Securities with less than five years remaining to maturity. This fund is short-term in nature, and so it has marginal interest rate risk. The tracking index is Bloomberg US Treasury TIPS (0-5 Year).

This fund was issued by Vanguard in 2012.

Expense ratio - 0.05%. 

Asset Under Management (AUM) - US$17.15 billion 

Average Daily Dollar Volume - US$99.74 million 

Average Daily Share Volume - 1,901,763

Total holdings - 20

Yield to Maturity (YTM) - 0.27%

Annualized dividend - US$3.4968

It closed at US$51.88 on Oct 11, 2021. The ETF rose 1.83% YTD.

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iShares 0-5 Year TIPS Bond -- (STIP)

The ETF tracks US Treasury Inflation-Protected Securities (TIPS) that matures within five years. It tracks Bloomberg US Treasury TIPS (0-5 Years)

This open-ended fund was launched by Blackrock in 2010.

Expense ratio - 0.05%. 

Asset Under Management (AUM) - US$6.92 billion 

Average Daily Dollar Volume - US$63.16 million 

Average Daily Share Volume - 596,244

Total holdings - 18

Yield to Maturity (YTM) - 0.22%

Its YTD return is 1.05%. The ETF closed at US$105.62 on Oct 11.

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Quadratic Interest Rate Volatility and Inflation Hedge -- (IVOL)

This ETF is actively managed, and its long options are linked to the US interest rate swap curve. The open-ended fund was issued by CICC in 2019. The fund works better in a volatile interest rate scenario as it is linked to the hedge options.

Expense ratio – 1.05%. 

Asset Under Management (AUM) - US$3.56 billion 

Average Daily Dollar Volume - US$27.26 million 

Average Daily Share Volume - 977,697

Total holdings - 3

The fund fell 0.48% YTD. The closing price on Oct 11 was US$27.93.

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SPDR Portfolio TIPS ETF -- (SPIP)

SPIP tracks inflation-protected securities from the US Treasury with at least one year to mature. The ETF was issued by State Street Global Advisor as an open-ended fund in 2007.

It tracks Bloomberg U.S. Government Inflation-linked Bond Index.

Expense ratio – 0.12%. 

Asset Under Management (AUM) - US$3.12 billion 

Average Daily Dollar Volume - US$36.88 million 

Average Daily Share Volume - 1,130,454

Total holdings - 45

Yield to Maturity (YTM) - 0.98%

The fund closed at US$31.08 on Oct 11, 2021. It fell 0.16% YTD.

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(Inflation ETFs, TIPS, Treasury Inflation-Protected Securities)

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FlexShares iBoxx 3 Year Target Duration TIPS Index Fund -- (TDTT)

TDTT tracks inflation-protected US government debt with 1-10 years of maturity. It follows iBoxx 3-Year Target Duration TIPS. The Northern Trust issued this ETF in 2011 as an open-ended fund.

Expense ratio – 0.18%. 

Asset Under Management (AUM) - US$1.41 billion 

Average Daily Dollar Volume - US$7.44 million 

Average Daily Share Volume - 281,738

Total holdings - 18

Yield to Maturity (YTM) - 0.43%

The ETF closed at US$26.295 on Oct 11. Its YTD return is 0.73%.

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PIMCO 1-5 Year US TIPS Index -- (STPZ)

The exchange-traded fund tracks short-term US Treasury Inflation-Protected Securities market-value-weighted index. It was issued by Allianz. STPZ’s inception year is 2009, and it started as an open-ended fund. Its tracking index is ICE BofAML 1-5 Year US Inflation-Linked Treasury Index.

Expense ratio – 0.20%. 

Asset Under Management (AUM) - US$1.14 billion 

Average Daily Dollar Volume - US$9.83 million 

Average Daily Share Volume - 184,761

Total holdings - 16

Yield to Maturity (YTM) - 0.40%

The fund closed at US$54.88 on Oct 11. It gave a 1.19% YTD return.

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SPDR Bloomberg Barclays 1-10 Year TIPS -- (TIPX)

The ETF invests in securities issued by the US government. It tracks 1-10 years of US Treasury Inflation-Protected Securities based on a market-value-weighted index.

The State Street Global Advisor had launched this ETF as an open-ended fund in 2013. It tracks the Bloomberg 1-10 Year U.S. Government Inflation-Linked Bond Index.

Expense ratio – 0.15%. 

Asset Under Management (AUM) - US$938.21 million 

Average Daily Dollar Volume - US$5.53 million 

Average Daily Share Volume - 261,380

Total holdings - 33

Yield to Maturity (YTM) - 0.72%

TIPX ETF closed at US$21.09 on Oct 11, 2021. The ETF gave a 0.83% return YTD.

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Bottomline

Some investors opt for the Treasury Inflation-Protected Securities ETFs to beat inflation and avoid risks associated with stock market volatility. However, investors must analyze the investment instrument carefully before investing in the stock market.

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