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How Do You Purchase Treasury Inflation Protected Securities?

April 26, 2017Finance inflation Management managing money protected purchase securities Treasury

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How Do You Purchase Treasury Inflation Protected Securities?

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Treasury Inflation Protected Securities, or TIPS, are notes and bonds whose principal and coupon payments are automatically adjusted to compensate for inflation. These investments effectively mitigate inflation risk and guarantee a real rate of return backed by the US government. As a result, Treasury Inflation Protected Securities are an important part of an investment portfolio when inflation is expected to be on the rise. Here is a simple guide for those looking to purchase TIPS. Decide whether it’s more appropriate to invest in an individual Treasury Inflation Protected Security or a fund comprised of many different TIPS. With individual TIPS, the full principal is guaranteed if it is held until maturity. With TIPS funds however, there is no maturity date so there is no such guarantee. On the other hand, funds offer greater diversification and pay out interest on a monthly or quarterly basis whereas individual bonds only pay out twice per year. If the decision is made to buy indivi