5 Best Mutual Funds to Fight Inflation

These five mutual funds cover a wide variety of asset classes, but they share a similar trait: They're effective hedges against inflation.

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Inflation is here, and it doesn't look like it's going away anytime soon. Fortunately, investors looking to beat back rising prices have numerous options at their disposal, including several mutual funds that should fare well against inflation.

The January 2022 Consumer Price Index reading was a wake-up call. Consumer prices rose by 7.5% annually – the quickest pace of growth in 40 years. The Federal Reserve, once insistent that most inflationary pressures over the past few months have been transitory, has changed its tune, acknowledging that some rising prices might indeed be quite sticky.

When the economy heats up, investors begin to expect that the Federal Reserve will cool inflation with higher interest rates. (Indeed, CME data puts the chances of a 0.5-percentage-point hike to the Fed's benchmark interest rate at 44.3%, up from 25% before the latest CPI was released.) That puts downward pressure not only on investors' current bond holdings, but also stocks, as corporate borrowing becomes more expensive.

Fortunately, mutual funds can help you beat back inflation via a number of diverse strategies. The best mutual funds for inflation invest in wide range of assets, from Treasury inflation-protected securities (TIPS) to commodities to real estate and more.

Here are five of the best mutual funds to protect against inflation.

Returns and data are as of Feb. 9, unless otherwise noted, and are gathered for the share class with the lowest required minimum initial investment – typically the Investor share class or A share class. If you use an investment adviser or online brokerage, you may be able to buy lower-cost share classes of some of these funds. Dividend yields on equity funds represent the trailing 12-month yield. SEC yields reflect the interest earned after deducting fund expenses for the most recent 30-day period and are a standard measure for bond and preferred-stock funds.

Kent Thune
Contributing Writer, Kiplinger.com

Kent Thune, CFP, is a financial professional that helps individuals and businesses achieve their goals through a variety of delivery methods, including investment advice, financial planning and writing.