After years of dealing with rock-bottom inflation and record-low interest rates, investors are now facing the rise of both.

The new market climate will create a mixed bag of opportunities and pitfalls, said Michael E. Kitces, director of financial planning at the Pinnacle Advisory Group LLC in Columbia.

On the interest rate front, rising rates will be welcomed by investors who keep their savings in money market funds. For several years, the funds have been paying only a smidgen of interest. Savers who cherish bank certificates of deposit also can look forward to higher returns on their CDs.

But to get ready for those higher rates, Kitces cautioned, savers should stay with short-term CDs, so they can be rolled over quickly as rates rise.

On the inflation front, the investment choices are more esoteric.

Because rising prices erode the value of money, many investors look for investments that will protect and even increase their savings.

Here is Kitces' guide to some of the investments that will do well when inflation and interest rates are both rising:

* Treasury inflation-protected securities (TIPS) -- These Treasury bonds protect investors' purchasing power by tying the value of the bonds to the consumer price index. As the inflation rate rises, both the bond's principal value and its interest payments increase. TIPS can be bought from the Treasury or through many mutual fund companies.

* Short-term bond funds -- These funds can be based on either government or corporate bonds. Short-term bonds, Kitces says, usually come due in less than three years. Investors sometimes avoid all bond funds when rates are rising because they know the value of the bonds will fall. However, Kitces said, the loss of principal on short-term bond funds tends to be minimal.

Meanwhile, the other advantage of a short-term bond fund is that as older bonds expire, they are replaced with newer bonds paying higher interest.

Short-term corporate-bond funds tend to have slightly higher yields than short-term government-bond funds to compensate for their somewhat higher risk level. Short-term bond funds are available at most mutual fund companies.

* Commodity mutual funds -- Inflation may be bad news for savers and fixed-income investors, but it can be good for people who invest in gold, copper, other metals, oil, coal, forest products and other commodities. Gold, which is highly volatile, tends to soar during times of economic and geopolitical turmoil.

"Investing in natural resources is a way to hedge against inflation," said Charles M. Ober, manager of the T. Rowe Price New Era Fund (PRNEX), which has 56 percent of its money in oil- and energy-related stocks. (www.troweprice.com)

Commodities, especially hard assets, increase in value, Ober said, because they are continually being depleted, causing prices to rise on the remaining supplies.

The American Century Global Gold Fund (BGEIX) has most of its money in companies that are engaged in mining, processing, fabricating or distributing gold or other precious metals. Demonstrating the volatile nature of gold prices, the fund gained 66 percent for the 12 months ended March 31. But it has fallen 27 percent since then. (www.americancentury.com)

At the Oppenheimer Real Asset Fund (QRAAX), which has 54 percent of its money in oil, portfolio managers Kevin Baum and Angelo G. Manioudakis recently told shareholders that the fund was benefiting from "strong demand meeting relatively weak supply, resulting in upward pressure on prices." Another positive factor, they said, was the strong demand for commodities from China. In addition, the erosion of the U.S. dollar was making U.S. goods cheaper abroad and spurring demand for American commodities. (www.oppenheimerfunds.com)

A somewhat different type of commodities fund is the PIMCO Commodity Real Return Strategy Fund (PCRAX). It describes itself as "an enhanced index fund focusing on commodities . . . typically through swap agreements, backed by a portfolio of inflation-indexed bonds and other fixed-income securities." Thus it combines both active and passive investment management. (www.pimcofunds.com)

* Rising Interest Rate Funds -- When interest rates rise, bond prices fall. Pinnacle's Kitces suggested two mutual funds that let an investor bet that prices of the 30-year Treasury bond will fall.

One is the ProFunds' Rising Rates Opportunity Fund (RRPIX), which uses leveraged investment techniques to achieve the opposite result of the daily price movement of the long bond -- plus a 25 percent kicker. (www.profunds.com)

The other is the Rydex Juno Fund (RYJUX). This fund also seeks to provide returns that are the opposite of the daily price movement of the long Treasury bond. (www.rydexfunds.com)

A similar result can be obtained, Kitces said, by selling short a fund known as iShares Lehman 20+ Year Treasury Bond Fund (TLT). The fund is based on a Lehman Brothers index of the same name and represents the long end of the Treasury market. When interest rates rise, long bonds fall the most. The iShares fund trades like a stock. When investors "short" sell a stock or fund such as TLT, they are betting that the share price will fall and that they can then buy the shares for less than they sold them for -- and pocket the difference.