The Horizon Kinetics Inflation Beneficiaries ETF (INFL) is an exchange traded fund. It is managed by Horizon Kinetics Asset Management LLC. There are risks associated with investing, and the price you pay may not always be the actual value you’ll earn. In addition, you’ll have to deal with brokerage commissions, which may lower the amount of return you can expect. The Fund is also exposed to adverse macroeconomic conditions.
There are two types of inflation: demand-pull inflation and cost-push-inflation. Both are related to the balance of supply and demand in an economy. Demand-pull inflation occurs when there is an increase in demand, typically due to a healthy economy. As consumers’ purchasing power increases, they’re able to buy more, so companies ramp up production to meet that demand. Other causes of demand-pull inflation include sudden growth in the popularity of a product.
High rates of inflation are a serious economic burden for any economy. Not only must businesses account for the increased costs, but also the lowered returns they receive from their investments. Furthermore, businesses may be making mistakes in estimating future inflation. When they base their estimates on previous inflation, they are inadvertently setting themselves up for inflation inertia. That’s not to say that low-to-moderate inflation isn’t bad, but it doesn’t help either.
Increasing prices distort the purchasing power of those with fixed interest rates. For example, inflation of five percent would be good for the borrower with a fixed-rate mortgage at 5 percent. Higher inflation, however, would make servicing the debt easier, which would benefit the borrower and reduce the lender’s real income. Therefore, high-inflation countries have a high rate of inflation. But high-inflation countries tend to be inefficient in real terms.
Inflation rates and interest rates tend to move in tandem. Raising interest rates can dampen the economy’s animal spirits and limit the resulting price pressures. While it may seem reasonable to pay a higher interest rate for a boat, the risk-free rate of return for Treasury bonds is likely to increase as well. Higher rates can make it difficult for new borrowers to save, so it is wise to opt for a fixed-rate mortgage.
During an economic recovery, some amount of inflation is inevitable. However, high inflation can erode the purchasing power of a currency. The general level of prices can only buy fewer aggregate goods and services. Different sectors of the economy are affected differently. For example, those with physical assets will benefit more if prices increase. Inflation will also require more money to acquire physical assets. This means that the amount of fixed income people have will determine how much they are willing to spend.
The INFL fund’s stock-picking philosophy is to invest in companies with asset-light balance sheets, a strategy that should prove advantageous in an inflationary environment. The fund’s analysts have identified three categories of beneficiaries: businesses that produce low debt, commodities, and investment banks. These three categories are typically asset-light and should have positive long-term returns. INFL investors have reaped the rewards of this strategy early on, with alpha returns exceeding 40% over a short period of time.
Risks associated with infl
Inflation risk affects the purchasing power of investors. Inflation causes price increases, which means that the real value of cash flows from investments diminishes. This phenomenon can be seen most clearly with fixed-income investments. For example, a bond paying a 3% coupon rate would represent a nominal return, but at a time when inflation is at 2%, that nominal return would be worth just 1% more.
While global economic growth is improving, the risks associated with inflation are increasing. Rising interest rates have slowed down demand for certain commodities. This has contributed to an increase in short-term inflation expectations, though it is unlikely to have a long-term effect on inflation. However, the monetary and fiscal responses to these problems suggest that inflation risks could remain elevated for some time. However, foreign demand for U.S. assets may counteract the risk of increased inflation.
Inflation is one of the many risks faced by investors. Although it is silent, it is a common byproduct of a functioning market and growing economy. As long as investors take steps to combat inflation, it is important to accept that it is part of investing. The only way to make sure that investors do not become victims of this phenomenon is to keep an eye on the inflationary trends. When they make decisions related to their investments, they should be aware of the risks associated with the various types of inflation.
One factor that makes INFL a good stock to consider for long-term investors is the diversified portfolio of companies. The fund’s top holding is Texas Pacific Land Corp., a real estate investment company that also holds oil and gas royalties in the Permian Basin. Investors can also take advantage of exposure to oil and gas giant Viper Energy Partners LP (VNOM) and agri-industrial giant Archer-Daniel Midland Co. (ADM) are also in the fund. Finally, the fund has exposure to precious metals streaming company Wheaton Precious Metals Corp.
The return potential of INFL is good if you can hold on to the current level. The fund’s inception date is January 2021. It has posted an overall return of 26% compared to the S&P 500, and has widened its performance spread. The fund’s overall market positioning reflects its focus on the energy and materials sector. This sector has also reflected pressure from the market, with real estate names suffering the most.
While INFL has delivered positive returns this year, it does carry risks. Since INFL has exposure to companies that benefit from inflation, it does carry some risks. The stock’s strategy is also uncertain. The investment is risky, so investors should only invest in stocks that are able to sustain a consistent positive return. In addition, investors should be aware that investing is a high risk activity and may not be suitable for everyone.
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