TIPS Funds

Meg Richards, AP Business Writer, makes a case for TIPS (Treasury Inflation-Protected Securities) and TIPS mutual funds, as part of a diversified portfolio, in this article from Yahoo Finance. She explains how they work: "What TIPS bonds do is promise to compensate the investor for the true effects of inflation, after the fact. They do this by changing their values based on the Consumer Price Index -- the government's key inflation reading -- every six months. So if the CPI rises 5 percent, the price of a $1,000 TIPS bond would rise to $1,050. Investors also get interest payments above and beyond inflation..." Richards also spotlights three TIPS mutual funds: the Vanguard Inflation-Protected Securities fund (VIPSX), the Fidelity Inflation-Protected Bond fund (FINPX), PIMCO Real Return TIPS fund (IRRAX), and an exchange-traded fund, the iShares Lehman TIPS Bond fund, (TIP).

(permalink)

(May '04-Jun '05)