New Ways to Guard Against Rising Inflation

A new fund that seeks to combat inflation is Prudential Real Assets(PUDAX) . Prudential holds TIPS, commodities, gold and REITs. Portfolio manager Edward Campbell varies the mix as the sentiments of investors shift.

When investors are feeling confident and showing an appetite for risk, he emphasizes commodities and REITs, which tend to excel in bullish times. If the mood turns cautious, he holds more gold and TIPS, which are viewed as safe assets in difficult times.

When the sentiment is neutral, Campbell has 25% of assets in TIPS. The fund currently has 38.7% in TIPS. Campbell has 14.6% in gold and precious metals, an overweight position. "Investors are seeking to shun risk," he says.

Campbell argues that his fund is worth holding, even if inflation remains tame. The inflation-fighting assets can provide diversification because they sometimes do well when stocks languish. "During the past decade inflation was low, but gold and real estate did quite well," he says.