While the runaway inflation that had previously gripped countries like Zimbabwe and Argentina is not currently at the forefront on the fear list for investors in U.S, but inflation should not be forgotten. It is a silent danger as a result of the additional billions employed in government bailouts.

A combination of currency and inflation-protected ETFs may be able to protect an investor portfolios if the inflation expectations become real.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

Bearish on the U.S. Dollar
The PowerShares DB US Dollar Index Bearish (ARCA:UDN) is up roughly 2.3% so far this year. UDN's value increases when the US dollar index is falling. If the US dollar index drops as a result of economic issues, this ETF will provide you with some downside protection.

In Defense of Rising Consumer Prices
The iShares Barclays TIPS Bond Fund (ARCA:TIP) is up about 2.5% in 2012. The TIP fund is linked to a measure of inflation known as the Consumer Price Index (CPI or CPI-U). The CPI measures the prices wage earners, clerical workers or basically 90% of the entire U.S. population pay for a variety of expenses including food, transportation, energy and medical care. With oil prices near $105 per barrel, the increase in fuel prices may cause a jump in inflation, which may cause investors to start buying in anticipation of a fuel cost run up.

SEE: All About Inflation

Currency Exchange Consideration
The Canadian Dollar has continued to be strong against the US dollar in 2011. As the Canadian dollar has been trading above par. The CurrencyShares Canadian Dollar Trust (ARCA:FXC) has gained around 3.5% so far in 2012. Further weakening in U.S. dollar will have a positive effect on the FXC fund.

Final Thoughts
Rampant inflation in not a certainty, but the ETFs mentioned do offer protection should investors notice that prices are beginning to rise once again.

SEE: Profit From Forex With Currency ETFs

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Investing News

    Should You Be Betting with Buffett Right Now?

    Following Warren Buffett's stock picks has historically been a good strategy. Is considering his biggest holdings in 2016 a good idea?
  2. Products and Investments

    Cash vs. Stocks: How to Decide Which is Best

    Is it better to keep your money in cash or is a down market a good time to buy stocks at a lower cost?
  3. Investing News

    Who Does Cheap Oil Benefit? See This Stock (DG)

    Cheap oil won't benefit most companies, but this retailer might buck that trend.
  4. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  5. Stock Analysis

    Performance Review: Emerging Markets Equities in 2015

    Find out why emerging markets struggled in 2015 and why a half-decade long trend of poor returns is proving optimistic growth investors wrong.
  6. Investing News

    Today's Sell-off: Are We in a Margin Liquidation?

    If we're in market liquidation, is it good news or bad news? That party depends on your timeframe.
  7. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  8. Stock Analysis

    Why the Bullish Are Turning Bearish

    Banks are reducing their targets for the S&P 500 for 2016. Here's why.
  9. Stock Analysis

    How to Find Quality Stocks Amid the Wreckage

    Finding companies with good earnings and hitting on all cylinders in this environment, although possible, is not easy.
  10. Chart Advisor

    How Are You Trading The Breakdown In Growth Stocks? (VOOG, IWF)

    Based on the charts of these two ETFs, bearish traders will start turning their attention to growth stocks.
RELATED FAQS
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center