Treasury Inflation-Protected Securities, known as TIPS, have enjoyed surging popularity over the past few years, and the number of mutual...
Treasury Inflation-Protected Securities, known as TIPS, have enjoyed surging popularity over the past few years, and the number of mutual funds dedicated to these inflation-indexed bonds is on the rise.
TIPS, designed to help investors protect their assets against inflation, aren’t the bargain they were a few years ago.
But experts say as long as you’re comfortable with some short-term volatility, they deserve a spot in your portfolio, perhaps as much as 25 percent of your bond stake.
“The U.S. government introduced TIPS in 1997, but while many on Wall Street viewed them as a great investing tool, TIPS didn’t immediately capture the market’s fancy because their returns didn’t appear significant at the time, said Eric Jacobson, senior analyst at fund tracker Morningstar.
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It wasn’t until interest rates and bond yields started falling in the past few years that investors began to recognize the value of TIPS.
“There really isn’t anything like it in the investing universe,” Jacobson said.
“They make great sense as part of a longer-term asset allocation, both for those in the middle portion of their savings years, all the way to retirement. They have a level of predictability with regard to inflation that very few other assets can offer.”