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1.
If you want to add commodities to your portfolio to hedge against inflation, a good rule of thumb is to limit them to _______.
5-6%. Because they can be volatile, consider keeping them limited, especially if you are retired.
2.
What is the major reason for stocks being good inflation hedges?
Their potential for high returns. Their returns can be potentially higher than those of bonds.
3.
Stocks are an indirect way to protect your portfolio against the threat of inflation.
True. Stocks have the potential for higher returns than bonds, and inflation will take a smaller bite, in percentage terms, out of your future purchasing power.
4.
Treasury inflation-protected securities are backed by _______.
The US government. That adds an element of safety to inflation-conscious investors.
5.
Before you add commodities to your portfolio to hedge against inflation, what should you do?
Both of the above. Emerging markets tend to be heavy on basic-material producers, and they in turn are beneficiaries of higher demand and prices. And although owning energy stocks is not the same as owning commodities directly, energy stocks have a fairly high correlation with energy prices.