Inflation worries got you down? Buy TIP, a Treasury Inflation Protected ETF

Filed under: ETF Investing, Personal finance

With ever growing uncertainty whether our economy will face inflation or deflation in the months to come given recent government spending, what is certain is that no one wants to see their fixed income lose purchasing power. Unlike most bonds that pay out a fixed dollar amount in interest, treasury inflation protected bonds (TIPs) pay out a fixed amount over the consumer-price index (CPI), making them a popular choice for investor anticipating the economy to experience inflation. If inflation is higher than projected, the government adds to your principal on a TIP and makes up the difference!

Not only does owning TIPs allow one to keep up with monthly bills that are increasing in step with inflation, they are an important asset class to consider when determining an asset allocation strategy. TIPs enable one to further diversify a portfolio. Bonds are ideal for those not able to stomach much risk and TIPs in particular protect one's fixed income from eroding.

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Inflation worries got you down? Buy TIP, a Treasury Inflation Protected ETF originally appeared on BloggingStocks on Wed, 23 Sep 2009 18:00:00 EST. Please see our terms for use of feeds.

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