What are ‘Treasury Inflation-Protected Securities,' a.k.a. ‘TIPS?’
TIPS are a type of bond created to protect from inflation
Another great investment for fixed income are Treasury Inflation-Protected Securities.
TIPS are a kind of treasury bond created to protect investors from inflation. How?
- For more tips and best practices for your finances, go to the Money Monday page.
They’re indexed to inflation which means when you receive the semi annual interest payments the government takes the consumer price index into account.
The payments are calculated based on the inflated principal, so if there’s inflation during the life of the bond, it adds the percentage of inflation to protect your investment.
TIPS come in 5, 10 and 30-year maturities. They’re U.S. securities backed by the full faith and credit of the U.S. government, making them very safe with no credit or default risk.
The downside to the investment is they pay a lesser interest rate than a regular U.S. Treasury Note or bond. There shouldn’t be any inflation or deflation.
For more information, go here:
Copyright 2020 by WDIV ClickOnDetroit - All rights reserved.