Inflation-Protection Funds from Vanguard and Harbor Funds Aim to Keep Pace with Inflation

The US consumer has been hit in the pocketbook by sharp increases in food and energy prices causing concern over inflation in the economy. But, despite the continued run-up in commodity prices in oil, natural gas, corn, rice, and wheat, the general level of inflation in the US economy as reported has been moderate - percolating just above the Fed’s target range for inflation (believed to be 1.5% to 2%). Economists are split in their forecast for the US economy with many forecasting an environment of inflation exceeding 4% as food and energy costs are absorbed, while others believe other factors will mitigate the inflationary effects of higher energy and food prices and keep inflation in the target range. Individual investors who are paying higher monthly bills for household costs and are worried about inflation spiking have available to them mutual funds which target meeting or exceeding the rate of inflation. These funds have garnered more attention from the financial media in the recent months and appear to be growing in assets based on the most recent reports from mutual fund companies. Two of the funds rated high by Morningstar are the Vanguard Inflation-Protected Securities Fund and the Harbor Real Return Fund. Details on the two funds are listed below:

Vanguard Inflation-Protected Securities Fund

Year-to-date Return: 3.61%
52-week Return: 11.54%
SEC Yield: 0.94%
Expense Ratio: 0.20%
Assets: $15 billion +
Average Duration of Portfolio Holdings: 7.7 years
Minimum Investment: $3,000
Minimum IRA Investment: $1,000
Information: Vanguard.com

Harbor Real Return Fund

Year-to-date Return: 3.93%
52-week Return: 12.54%
SEC Yield: 3.93%
Expense Ratio: 0.56%
Assets: $82 million+
Minimum Investment: $1,000
Minimum IRA Investment: $1,000
Information: Harborfund.com

Consumers wishing to hedge their portfolios against inflation have many more options than the two funds listed above, but the Vanguard Inflation-Protected Securities Fund and the Harbor Real Return have very low minimum investments making them more widely accessible than other inflation-linked investments.