TIPS (Treasury Inflation Protected Securities) are a special type of note or bond that offers protection from inflation, something investors want in a big way right now. An inflation-indexed security pays interest every six months and pays the principal when the security matures. With TIPS, the coupon payments and underlying principle are increased to compensate for inflation as measured by the Consumer Price Index (CPI).
Joanne Von Alroth for Investor’s Business Daily reports that one of the hottest strategies as of late has been to invest in TIPS for some "fear insurance." iShares Lehman TIPs Bond (TIP) is up 5.4% year-to-date. The ETF tracks the Lehman Brothers Treasury Inflation Notes Index.
These types of funds are great for those investors who not only fear inflation, but fear losing their principal to boot. With these you get a government guarantee that you’re protected from the ravages of inflation.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.