These 8 Commodity ETFs Can Hedge Your Living Expenses

There are many experts that believe the low interest rates and the stimulus packages promoted by several of the world’s governments will lead to a renewed bout of inflation in the years ahead.  Already oil prices have increased dramatically from their low at the height of the financial crisis.  If you are concerned about the potential for future inflation, these 8 commodity exchange traded funds can help protect your purchasing power and allow you to profit even if your living expenses are increasing.

I have selected these commodity ETFs based upon the following criteria:

• Each fund has more than $1 billion in assets
• Each fund is liquid with greater than 1 million shares trading each day
• Each fund has options so that advanced trading and cash flow techniques can be used to enhance returns or protect profits or capital

Energy costs are a main source of monthly expenses for many households.  Gasoline for transportation tends to follow the price of oil.  It can be difficult at times to adjust one’s expenses when earning a living depends upon commuting.  Many homes use oil or natural gas for heat.  Natural gas is also a source of electricity generation which is used to power many of the conveniences of life.

USO is the symbol for the oil ETF.  It tends to follow the price of oil and gains when oil is up.  It can be a nice feeling to be making profits despite having to pay $3 a gallon for gasoline and can take some of the sting out of filling up.  UNG is the symbol for the natural gas exchange traded fund.  The same rationale for owning it applies as well.  Modern economies need energy and it will be quite a while before renewable sources of energy can supplant carbon based fuels.

Another major expense of daily living is food.  Inflations is quite noticeable in food prices.  Consider protecting yourself using the agriculture exchange traded fund, DBA.  Agriculture can also be impacted by changes in the weather so it is nice to be able to hedge against the unknown in this fashion also.

The collapse in real estate prices will only last so long.  In order to benefit when the eventual upturn occurs, one could invest in IYR, a real estate ETF.  Inflation is a monetary phenomenon and when banks begin leading again, the money supply will increase.  That money will find its way into all sorts of real assets including real estate.

If you just want to be exposed to commodities in general, you could invest in DBC, a commodity index ETF or XLB, a natural resources ETF which gives you exposure to the stocks of chemicals, packaging, mining, and construction companies to name a few.

Finally, you can get some exposure to the fluctuations in the strength of the dollar by investing in the gold or silver ETFs with the symbols of GLD and SLV, respectively.  Weakness in the US dollar and a decline in purchasing power can be offset by owning precious metals.

In summary, protecting your purchasing power and even profiting in the face of inflation can occur.  Exchange traded funds can provide one relative simple and liquid vehicle to accomplish this.  These 8 commodity ETFs could prove to be vital assets in securing your future.