A good way to gain diversified exposure to TIPS is through the PIMCO 1-5 Year U.S. TIPS ETF (NYSEArca: STPZ).
“STPZ is a solid, reasonably priced option for exposure to short-term TIPS,” Yoo said.
STPZ tries to reflect the performance of the market-cap-weighted ICE Bank of America Merrill Lynch 1-5 Year U.S. Inflation-Linked Treasury Index, which is comprised of TIPS with between one and five years until maturity. The portfolio shows a 0.20% expense ratio, a 1.88% 30-day SEC yield and a 2.92 year effective duration.
“Gains and losses from price volatility are muted thanks to the strategy’s short duration,” Yoo said. “As a result, this fund more closely tracks the realized inflation fluctuations over the short-run than its longer-duration counterparts do.”
For more information on the fixed-income space, visit our bond ETFs category.