Chapter 6. The Safest Investment There Is—Treasury Inflation-Protected Securities (TIPS)
Inflation is the enemy of the bond investor and is your enemy if you are living on a fixed income. Once you lock in a rate of return by buying a bond, if prices rise faster than your investment is growing, you are stuck. Fortunately, the federal government offers you a guaranteed way to beat inflation with no risk of losing any money: Treasury Inflation-Protected Securities (TIPS), also known as inflation-indexed Treasury notes (or bonds). This chapter explains how TIPS work and how you can best use them.
How TIPS Work
Most bonds are issued and later redeemed in units of $1,000. TIPS work differently: Although they are issued in units of $1,000, the principal ...