Understanding Inflation-Protected Bonds: A Guide to TIPS

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Introduction

Inflation is a key driver of economic stability and growth.​ When consumer prices rise, it erodes the purchasing power of individuals and businesses.​ This is why investors are constantly seeking ways to protect their investments from the harmful effects of inflation.​ One such investment option is inflation-protected bonds.​

What are Inflation-Protected Bonds?​

Inflation-protected bonds, also known as Treasury Inflation-Protected Securities (TIPS), are government-issued bonds that provide protection against inflation.​ These bonds are specifically designed to help investors maintain their purchasing power by adjusting the bond’s principal value with changes in inflation.​ This means that the interest and principal payments on these bonds are adjusted to keep pace with inflation.​

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