"The latest annual rate of inflation measured from last July to this July was 5.6%, the largest annual gain since way back in January 1991," observes Alexander Green.

Here, the investment director for the industry-leading The Oxford Club suggests that investors consider the iShares Lehman TIPS Bond Fund (ASE: TIP), noting, "This is a great way to buy a diversified portfolio of inflation-adjusted Treasuries and track them quite easily."

"The latest consumer price index figures were a bit of a shock; the annual rate of inflation measured from last July to this July was 5.6%, the largest annual gain since way back in January 1991.

"Despite these horrendous inflation figures, gold, mining shares and other inflation-sensitive indicators did nothing – or even fell. What gives?

"Remember that the market is always looking forward, not back. Investors are always more concerned with what lies ahead than what happened in the recent past. Next month or next year may be a different story entirely.

"That's why every investor should have a hedge in his portfolio, like inflation-adjusted Treasuries. These bonds are unique in the investment world. They are the only investment guaranteed to beat inflation. And they are great portfolio diversifiers. They don't march in step with either stocks or bonds.

"Inflation-protected securities are essentially Treasury bonds that hedge against inflation. You get an interest payment every six months, just like with the old-fashioned T-note.

"But your principal increases each year by the amount of the consumer price index. That means the amount you're paid in interest also increases by the amount of inflation.

"The interest you receive is exempt from state and local (but not federal) income taxes. And like other Treasuries, your investment is backed by the full faith and credit of the U.S. government.

"You can get these bonds directly from the U.S. government or from virtually any broker. But investors often tell me they have trouble buying them or even getting a price quote.

"The solution is the iShares Lehman TIPS Bond Fund. The fund attempts to replicate the return of the Lehman Brothers U.S. Treasury Inflation Notes Index.

"It is easy to buy, liquid, and the expense ratio is small, only two-tenths of one percent. This is a great way to buy a diversified portfolio of inflation-adjusted Treasuries and track them quite easily.

"This fund is best owned in your IRA or other qualified retirement plan, however, since the annual principal increase is treated as reportable income even though you don't receive it in cash.

"These are not likely to be the best-performing holdings in your portfolio in the year ahead. But if inflation ever comes back with a vengeance, both stocks and bonds will take the news poorly. And you'll be glad you own them."

Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.