TIPS Aren’t Just Gratuities
With yields at historic lows and the possibility of rising inflation, some investors are seeking opportunities for yield while protecting against inflation. One consideration is TIPS, or Treasury Inflation-Protected Securities. These securities are structured to pay investors the rate of inflation in addition to the fund’s stated yield, with protection that “kicks in” when inflation rises. However, if inflation declines, the yield will decline and generally be lower than the traditional Treasury Bond. TIPS might possibly be helpful to an investor who has no cost-of-living adjustment in a pension, for example, should inflation be on an uptick. Investors should carefully weigh the benefits and risks associated with this investment with their financial advisor and how it might relate to their personal circumstances such as risk tolerance and time horizon.
This information is provided for general educational purposes only and is not intended as specific advice for any individual.
Seek professional advice before taking any action in regard to your finances.
Treasury Inflation-Protected Securities, or TIPS, are subject to market risk and their longer duration makes them more sensitive to price declines associated with higher interest rates.