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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 _______.
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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?
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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.
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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 _______.
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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?
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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.