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Inflation can be bad news for investors. It causes a sustained increase in the prices of goods and services and erodes your future purchasing power. In other words, today's dollar won't buy as much down the road. That's why it's important to consider ways to fight inflation in your investment portfolio.
Since 1960, inflation has averaged 4.2% annually.
Definition: Consumer Price Index (CPI)
The higher the rate of inflation, the less your dollars will be able to purchase.
A whole host of factors are currently constraining inflation, but U.S. monetary and fiscal policies and a number of global economic imbalances suggest high and rising inflation could be on the horizon. But because it's impossible to predict inflation outcomes, we suggest a modest, permanent allocation to inflation-hedging investments.
Retirement is when investors face the greatest inflation risk because they need to fund the greatest amount of time in retirement, and typically aren't making regular contributions to offset declines. How much of an inflation hedge could you need?
Read more on Guidelines for Adding Inflation Hedges in Your Portfolio
When you've determined how inflation might affect your portfolio in the future, we offer three approaches, depending on how you want to manage your investments and how your portfolio is currently positioned:
Read more on Integrating Inflation Hedges into Your Portfolio
Learn more about the fund solutions we offer to help you hedge against inflation risk.
American Century Investments® Asset Allocation Portfolios: A mix of stock, bond and money market funds in a single fund; inflation-hedging investments are already built in to these broadly diversified portfolios.
Multi-Asset Real Return Fund1: A single, "off-the-shelf" portfolio that combines individual inflation hedges positioned for a variety of inflation environments; this single fund can be added to your existing diversified portfolio.
Real Estate Fund2,3, Global Gold Fund3, Short Duration Inflation Protection Bond Fund and Inflation-Adjusted Bond Fund4: Individual inflation-hedging funds that you can mix and match to add to your existing diversified portfolio.
We understand each investor is unique, and your needs may vary. Our goal is to help you, no matter what your investing style.
The value of the fund's shares may fluctuate significantly in the short term. At any given time your shares may be worth less than the price you paid for them. Since inflation-indexed securities trade at prevailing real, or after-inflation, interest rates, changes in these rates affect the value of such securities owned by the fund. Generally, when real interest rates rise, the value of these securities will decline. The opposite is true when real interest rates decline. Debt securities also are subject to credit risk. Investment in debt securities issued by entities other than the U.S. Treasury or U.S. government and its agencies may increase the potential credit risk associated with the fund. The fund's commodity-related investments may be subject to greater volatility than investments in traditional securities. Investing in foreign securities has certain unique risks that make it generally riskier than investing in U.S. securities. Investing in securities of issuers located in emerging market countries generally is riskier than investing in securities of companies located in foreign developed countries. The fund is classified as non-diversified; therefore, it may be more volatile than if it was diversified.
Understanding inherent risks such as interest rate fluctuation, credit risk and economic conditions are important when considering an investment in real estate.
Due to the limited focus of these funds, they may experience greater volatility than funds with a broader investment strategy. They are not intended to serve as a complete investment program by themselves.
The prospectus contains very important information about the characteristics of the underlying security and potential tax implications of owning this fund.
Diversification does not assure a profit nor does it protect against loss of principal.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.