National Inflation Association Report: Our Favorite ETFs and ETNs

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June 8, 2009 10:46am ETF BASIC NEWS NYSE:DBA

inflation1NIA is pleased to release its first report on Exchange traded funds (ETFs) and Exchange traded notes (ETNs). We believe one of the best ways to prepare for hyperinflation is by investing into ETFs and ETNs.

ETFs and ETNs trade like stocks on a stock exchange but are used to track the price of a single commodity, a basket of commodities, or an index of stocks.

The difference between an ETF and an ETN is: an ETF represents ownership in underlying assets; whereas an ETN is a debt note issued by a bank.

An ETN is more risky than an ETF because of counterparty risks. If the financial firm issuing the ETN goes bankrupt, they may not be able to pay out the money they owe you. When investing in an ETN, it would be a good idea to keep an eye on the bank that issued it. If the bank runs into any trouble, you might want to immediately sell.

With an ETF, the biggest risk is their accounting is wrong and they don’t own the amount of a commodity they are supposed to own. We consider this to be a very small risk and believe it is safer to own an ETF than to attempt to store a commodity on your own.

Now let’s go over the ETFs and ETNs we feel everybody should consider in order to diversify your portfolio with hedges against inflation and potentially make a fortune.

The first ETF we would like to suggest is what we feel to be the safest investment with the least amount of risk. The ETF we are referring to is the SPDR Gold Shares (GLD) trading at $87.38.

GLD is an ETF seeking performance corresponding to the price of gold bullion. Simply put, it follows the price of gold. We believe gold prices are going higher as the dollar collapses, and the best way to play gold is by buying GLD. Investing into GLD means you are investing into gold.

Gold tends to rise as the dollar falls and purchasing a gold ETF may help you hedge that exposure and capitalize on gold’s rally to new highs.

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