Top Mutual Funds That Beat Inflation in 2025 – Inflation has emerged as a pocketbook issue for millions of Americans. When the price of groceries, gas and housing keeps going up, your money is worth less and less in the market. The good news? Now smart investors are fighting back, with mutual funds that don’t merely keep pace with inflation but rather outpace it.
If you’re sick of seeing your savings lose value in real terms, here are the best mutual funds that in 2025 consistently have beaten back inflation. We’ll explain the specific funds you should be seeking out, why they tend to be low-cost winners, and how you can get started investing now.
Here’s Why Inflation Is Decimating Your Money (And How You Can Fight Back)
Imagine this: You have $10,000 sitting in a basic savings account that pays 0.5 percent interest. Meanwhile, inflation runs at 3.5%. You can buy only what $9,650 could buy at the beginning of the year with all of your money at the end of the year. You’re literally losing money by taking the “safe” approach.
That’s where inflation-beating mutual funds come in. These funds invest in assets that tend to increase more quickly than the general price level, allowing your money to grow in real terms.
What Makes a Mutual Funds “Inflation-Proof”?
Here are the characteristics of the best inflation-fighting funds:
Real Assets Exposure: They purchase shares in companies which are real asset providers (for example: real estate, commodities, infrastructure)
Pricing Power: Holds companies that can raise prices without losing customers
Diversification via Exposure to International Markets: Helps when your home market’s inflation runs hot
Flexibility Matters: The ability to respond to shifting economic conditions keep fund managers in the game
The Heavy Hitters: The 4 Top Inflation-Fighting Fund Categories
Real Estate Investment Trust (REIT) Funds
A REIT offers some of the best real estate properties and mortgage financing that are sold as an investment in funds.
Real estate is among the most effective hedges against inflation. When prices go up, a higher end of the value spectrum — property values and rents — also tends to rise. REIT funds put you into commercial real estate without the headaches of a landlord.
Why REITs Beat Inflation:
- Rental income adjusts with inflation
- Property prices usually go up along with regular price levels
- Tons of REITs own buildings that people need like apartments and warehouses
Top Performers in 2025:
- Vanguard Real Estate Index Fund (VGSLX)
- Fidelity MSCI Real Estate Index ETF (FREL)
- Schwab US REIT ETF (SCHH)
Treasury Inflation-Protected Securities (TIPS) Funds
TIPS funds buy government bonds that are tailored to protect against inflation. The underlying value of these bonds increases along with the Consumer Price Index.
TIPS Fund Advantages:
- Government backing provides safety
- Principal automatically adjusts for inflation
- Inflation means paying more in interest
Leading TIPS Funds:
- Vanguard Inflation-Protected Securities Fund (VIPSX)
- iShares TIPS Bond ETF (SCHP)
- Fidelity Inflation-Protected Bond Index Fund (FIPDX)—invests in the common stocks of companies believed to have above-average potential for future earnings and dividends compared to other companies.
Commodity Funds
During inflation, commodities like oil, gold and agricultural products tend to increase. These funds hold companies that either produce or benefit from higher commodity prices.
Commodity Fund Benefits:
- Direct exposure to inflation-sensitive materials
- Portfolio diversification outside of stocks and bonds
- Possibility of large returns in commodity supercycles
Large-Cap Value Funds
Businesses with pricing power and competitive positions already in place tend to do well in inflationary environments. These stalwart businesses are the kind on which large-cap value funds concentrate.
The All-Stars: Funds That Beat Inflation in 2025
Standout Performers:
| Fund Name | 2025 YTD Return* | Expense Ratio | Minimum Investment |
|---|---|---|---|
| Vanguard Value Index Fund | 8.2% | 0.05% | $3,000 |
| Fidelity Value Fund | 7.9% | 0.59% | $0 |
| T. Rowe Price Value Fund | 8.7% | 0.66% | $2,500 |
*As of August 2025, past performance does not necessarily predict future results
International Developed Markets Funds
Foreign diversification can come in handy when domestic inflation begins to pose problems. These funds invest in mature international firms that can take advantage of varying economic climates.
Top International Options:
- Vanguard Developed Markets Index Fund (VTMGX)
- Fidelity International Index Fund (FTIHX)
- American Funds EuroPacific Growth Fund (AEPGX)
Dividend Growth Funds
Businesses that routinely hike dividends are often those with the pricing strength to protect margins in an inflationary environment. These are funds geared toward dividend-growing stocks.
Dividend Growth Champions:
- Vanguard Dividend Growth Fund (VDIGX)
- T. Rowe Price Dividend Growth Fund (PRDGX)
- Fidelity Dividend Growth Fund (FDVV)
Smart Tactics for Constructing Your Inflation-Fighting Portfolio
The Core-Satellite Approach
Create a core with broad market index funds and add specialized inflation-fighting funds as “satellites” around the core.
Sample Allocation:
- 40% Total Stock Market Index Fund
- 20% International Stock Fund
- 15% REIT Fund
- 15% TIPS Fund
- 10% Commodity or Value Fund
Your Path to Success Through Dollar-Cost Averaging
Rather than trying to time the market, invest a regular sum. This method helps avoid volatility and encourages discipline.
Dollar-Cost Averaging Benefits:
- Reduces impact of market timing
- Creates consistent investing habits
- Removes the emotion from investing decisions
Rebalancing: Your Secret Weapon
Review and rebalance quarterly. When one asset class does particularly well, sell some of it and buy more of other assets. This “buy low, sell high” approach can enhance long-term returns.
Red Flags: What Not to Do in the Fight Against Inflation
High-Fee Funds
You could also run the risk that high fees begin to eat into your inflation-fighting returns. Stick with funds with an annual expense ratio of less than 1%, and your threshold ideally should be 0.5%.
Overly Complex Strategies
Some of the funds also use derivatives and other complex strategies that could fail to do what they are supposed to. Simple and straightforward often works better in the long run.
Performance Chasing
Resist the urge to jump between funds because of short-term performance. Inflation should be fought with patience and perseverance.
Getting Started: Your Action Plan
Step 1: Evaluate Your Current Situation
Look at your existing investments. What’s your cash or lower-yielding bonds allocation? These are some of the areas most susceptible to inflation.
Step 2: Choose Your Platform
Many brokerages also have commission-free trading of mutual funds as well as ETFs. Popular options include:
- Vanguard (cheapest for Vanguard funds)
- Fidelity (no minimums, excellent research)
- Schwab (full service, very customer service oriented)
- TD Ameritrade (extensive fund selection)
Step 3: Start Small and Build
You don’t need thousands to get started. Many funds have no minimum investment, and you can start with as little as $100.
Step 4: Automate Your Success
Automate your contributions, so you don’t have the opportunity to time the market. Even $200 a month can lead to substantial wealth over time.
Taxes and Your Inflation Plan
Tax-Advantaged Accounts First
Contribute as much as you can, up to the maximum, to your 401(k)s and IRAs before you do anything with the rest in taxable accounts. The tax advantages further turbocharge your power to fight against inflation.
TIPS in Tax-Deferred Accounts
TIPS create taxable income even when you don’t get cash payments. Ideally keep these funds in tax-deferred accounts.
Index Funds for Taxable Accounts
Low-turnover index funds produce fewer taxable events, so tax-efficient funds also are well-suited for taxable investment accounts.
The Future of Inflation-Fighting Investing
So successful inflation protection is not about forecasting the future — it’s about creating a diversified portfolio that can respond to different environments. The funds and strategies described here have typically offered inflation protection — but markets change.
Keep track of economic trends but don’t allow short-term noise to distract you from your long-term strategy. The key is to remain balanced, with real assets, international diversification, and institutions with pricing power.
Remember, the war to outrun inflation is a marathon, not a sprint. The successful ones are the investors who get started early, stay consistent and resist the temptation to chase short-term performance.
Future you will thank yourself for taking action to preserve your purchasing power today. The question isn’t if inflation makes a comeback — it’s what you’ll do when it does.
Frequently Asked Questions : Mutual Funds
Q: How much do I put into these inflation-fighting funds?
A: Many financial experts advise anywhere between 10% to 30% of your portfolio in inflation-hedging assets, and some of that depends on your age and risk tolerance. For younger investors in particular, they can usually ride out the ups and downs of more aggressive inflation hedges, though those closer to retirement may prefer TIPS and dividend-paying stocks.
Q: How risky are REIT funds in economic downturns?
A: They can be volatile in times of market stress, but they’ve historically proven to be a resilient asset class that has offered a good bit of inflation protection over long stretches. Spreading your real estate investment across multiple types of real estate (residential, commercial, industrial) can also minimize risk.
Q: Should I stay away from bond funds entirely during periods of high inflation?
A: Conventional bond funds do poorly with inflation, but TIPS funds and I Bonds do well if prices rise. The trick is to select the right type of bond fund for times of inflation.
Q: How frequently should I rebalance my inflation-fighting portfolio?
A: Rebalancing quarterly or semi-annually is usually adequate. The more frequently a portfolio is rebalanced, the higher the transaction costs and taxes incurred and the less benefit there is to rebalancing.
Q: Can I employ these techniques in my 401(k)?
A: Many 401(k) plans have inflation-fighting strategies such as REIT funds, international funds and some even include TIPS funds. Review the offerings in your plan and consider adding these to your retirement accounts.
Q: How do ETFs and mutual funds differ in how they protect against inflation?
A: Either one can serve as effective inflation protection. ETFs tend to have lower fees and more trading flexibility, but mutual funds may have automatic reinvestment and are easier to buy in with a dollar-cost averaging approach.
Q: How can I tell if a fund is actually beating inflation?
A: Compare the fund’s returns to the Consumer Price Index (CPI) over several years. A fund that is beating inflation should have the capacity to earn returns that exceed the inflation rate consistently over long stretches.
Q: Do I need international funds for inflation protection?
A: Diversification overseas can protect investors when their own country is experiencing high inflation, but currency movements complicate things. A combination of domestic and international exposure tends to offer the best of both worlds.
