TIPS

TIPS

 

TIPS is an acronym that stands for Treasury Inflation Protected Security.

With an average weighted maturity around 7 years, TIPS share a bit in common with the total bond market.  What separates them is that they are a special class of US treasury bond that is adjusted to inflation every year.

One should note from the chart on the left that this does not mean they always have a positive real return.  TIPS are still influenced by changing interest rates just like all other bonds, and some people fear that the government that gets to set the inflation measure may not always do so in the investors’ favor.

Note that TIPS are a relatively new invention and have only been around since 1997.  The data here uses historical bond and inflation data to calculate how TIPS would have performed in years past had they been a viable option.

Index Funds
Source Data
  • Synthetic TIPS data provided by Cb (Data from Kothari’s paper)
  • Vanguard Inflation-Protected Security Fund (VIPSX) 2001+

Portfolios with TIPS assets