I agree and that is the conundrum. I have learned to not 'reach' for yield because in most cases my preferred issue and/or bond blows up. What do you do?
I am thinking in addition to my Treasury money fund (this would depreciate over time w/ that type of inflation but is safe), take a % and put into a mutual fund product that may/could keep up w/ inflation. You want growth, hard asset exposure (both gold & silver including miners) and even global exposure to some commodities that s/d appreciate from inflation.
I have mentioned I am looking at this Vanguard Fund:
Vanguard Global Capital Cycles Fund (VGPMX): This fund is a strong fit for your criteria, as it's specifically designed to invest in companies that are sensitive to global capital cycles. A key feature is that it invests at least 25% of its net assets in securities of companies whose principal business activities are in the precious metals and mining industry. This directly addresses your desire for exposure to gold, silver, and miners. While it's a global fund, it can be more volatile due to its concentrated holdings and exposure to foreign markets. ---------------------------------------------------------------
Year-to-Date (YTD) Performance
Based on the most recent data available, here is the YTD performance for each of the Vanguard funds as of September 2025:
- Vanguard Global Capital Cycles Fund (VGPMX): YTD return is approximately 32.14% (as of August 31, 2025) and 39.19% (as of September 11, 2025). This fund has shown significant growth, which is consistent with its focus on precious metals and other cyclically sensitive industries.
- Vanguard Commodity Strategy Fund (VCMDX): YTD return is approximately 10.26% (as of August 31, 2025) and 10.85% (as of September 11, 2025). This fund has also shown a strong positive performance, aligning with its objective to provide broad commodity exposure.
- Vanguard Inflation-Protected Securities Fund (VIPSX): YTD return is approximately 6.24% (as of August 31, 2025) and 6.94% (as of September 5, 2025). This fund's performance is closely tied to inflation itself, and its positive return reflects the impact of inflation on its principal value.
It's important to note that these figures are based on specific dates and may fluctuate. Past performance is not an indicator of future results.
Portfolio Allocation to Mitigate 7% Inflation
The question of a specific percentage allocation to mitigate a 7% inflation rate over the next five years is complex. There is no single "correct" answer, as a definitive portfolio allocation to perfectly counteract a specific inflation rate is impossible to guarantee. Market conditions, economic cycles, and the performance of individual assets are all subject to change. However, based on the principles of investing to maintain purchasing power during inflationary periods, a hypothetical allocation could be constructed.
A Treasury money market fund is designed for safety and liquidity, but it is not built to outpace inflation. It will likely depreciate in value in real terms (after accounting for inflation). Therefore, to "help mitigate" a 7% inflation rate, the bulk of your portfolio would need to be in assets with the potential for significant growth.
Given your thesis, a combination of your Treasury money fund and VGPMX could be used. Here's a possible approach and the rationale behind it:
- A more aggressive allocation to potentially outpace a 7% inflation rate might involve a significant tilt towards VGPMX. For example, a 70% VGPMX / 30% Treasury Money Fund allocation. The rationale is that VGPMX, with its concentration in hard assets like precious metals and mining, has the potential for very high returns during periods of high inflation. The Treasury money fund serves to provide a small buffer of stability and liquidity, but its role in this portfolio is minimal in terms of generating inflation-beating returns. This is a high-risk, high-reward strategy.
- A more moderate allocation that balances growth potential with some stability might be a 50% VGPMX / 50% Treasury Money Fund split. This would still be a very aggressive approach. While it provides substantial exposure to assets that could thrive in an inflationary environment, it also retains a large allocation to a safe asset that will likely lose purchasing power. The overall success of this portfolio would heavily depend on VGPMX's performance.
Important Considerations:
- Diversification: The proposed basket of a money fund and a single, concentrated mutual fund (VGPMX) is highly undiversified. A more robust portfolio for fighting inflation would typically include a wider range of assets, such as a broader stock market fund (like Vanguard Total Stock Market Index Fund), international stocks, and other inflation-linked products like VCMDX or VIPSX.
- Risk Tolerance: A 70/30 or even 50/50 split with a volatile fund like VGPMX would expose you to substantial risk. If inflation were to subside or if the mining and commodity sectors were to face a downturn, this portfolio could experience significant losses.
- Time Horizon: You mention a five-year time horizon. While this is not short-term, it's also not a long-term horizon (e.g., 20+ years). Volatile assets can experience deep drawdowns that may not recover within five years.
For a portfolio designed to maintain purchasing power, financial advisors often recommend a globally diversified mix of stocks and inflation-linked bonds. A more typical strategy might involve a mix like:
- A significant percentage in a broad-based stock fund (Vanguard Total Stock Market Index Fund or Vanguard Total World Stock Index Fund) for long-term growth.
- A smaller, but meaningful, allocation to inflation-linked bonds (VIPSX) for direct inflation protection.
- A tactical, smaller allocation to commodity or hard-asset funds (like VGPMX and VCMDX) to capture potential upside from a high-inflation environment.
Without knowing your personal financial situation, risk tolerance, and investment goals, it is impossible to recommend a specific allocation. The best strategy is to consult with a financial advisor who can help you determine the appropriate asset allocation for your specific needs.
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FWIW I own some Vanguard Commodity Strategy Fund (VCMDX) & is very cyclical and not a perfect hedge and in the past owned Vanguard Inflation-Protected Securities Fund (VIPSX) but sold it all as it failed to keep up w/ the inflation.
This is my pick: Vanguard Global Capital Cycles Fund (VGPMX)
I was thinking 25% VGPMX and 75% Treasury Money Fund but based on the AI suggestion maybe a higher % of VGPMX but scaled in over 12 months. Note, you have to pay taxes on the capital gains in VGPMX so the % return is a bit less vs the tax paid on the Treasury Money Fund . . . |
