Equity investments can guard against inflation
I'm really concerned about inflation in the coming years. I think inflation will come to the forefront in 2010 and I want to be prepared. I own gold, silver and Treasury Inflation-Protected Securities, but I also want to own some equities that will increase in value when inflation starts to grab the headlines. Can you suggest some equity investments that will either mirror the inflation rate or even exceed it? There is one caveat: I do not want to own speculative issues like precious metal stocks, commodities, currency futures or oil futures. I'm not an aggressive investor and my investment in gold, silver and TIPS is 15 percent of my $400,000 portfolio and I'd like to bring that amount up to 30 percent by investing $60,000 in some good, conservative and non-volatile equities. Some of these investments have already increased a lot in value, so do you think I waited too long to buy them? — D.L., Ann Arbor, Mich.
Absolutely not. In fact, the sooner you fall behind, the more time you have to catch up.
I've got your request covered with three no-load Fidelity Mutual Funds and recommend that you invest $20,000 in each of the following:
1. Fidelity Inflation Protected Bond Fund (FINPX — $11.31).
2. Fidelity Strategic Real Return Fund (FSRRX — $8.59.
3. Fidelity Global Common Stock Fund (FFGCX — $15.39).
The following discussion will give you some facts about each of these Fidelity funds.
FINPX's $2-billion portfolio gained 9.3 percent in 2009 and has a current 0.79 percent yield. It has low fees (0.45 percent) and good management that keeps about 94 percent of its investments in various maturities of the U.S. Treasury Inflation Protected Securities. Manager William Irving will shift maturities based upon which of them look cheap or expensive at any given time. Irving will also buy TIPS through derivative contracts and invest in collateral, backing those positions in government mortgage-backed securities.
FSRRX is a $4.9-billion portfolio that gained 22.3 percent in 2009 and has a current yield of 1.65 percent. This fund is designed to fight inflation via multiple approaches. Manager Joanna Bewick's portfolio has about 30 percent in TIPS, about 25 percent in floating rate loans, some 25 percent in commodity-linked notes and related investment plus 20 percent in REITs and other real-estate-related investments.
FFGCX is a $162 million fund that opened for business in March 2009 and is managed by John Wickwire, whose last 20 years were in Boston managing the successful Evergreen Fund. FFGCX's primary goal is capital gains. Wickwire keeps 80 percent of the portfolio in companies that are engaged primarily in the energy, metals and agricultural industries and allocates its investments in different countries in Europe, South America and Asia. If Wickwire's performance at Fidelity matches his performance at Evergreen, then FFGCX should do well long term.