Treasury Inflation Protected Security

Market Terms

We don't know everything about the markets.  We're just devoted to learners.  Taken from those smarter than ourselves, here's how we define Treasury Inflation Protected Security.

TIPS are Treasury bonds that are indexed to an inflationary gauge to protect investors from inflation-related decline in purchasing power.  In theory, TIPS are adjusted in price to retain real value as inflation rises.  They are a popular asset for both protecting portfolios from inflation as well as profiting from it due to the interest paid out every 6 months at a fixed rate.  However there are drawbacks: TIPS often under-perform traditional treasuries, real inflation may be higher than measured inflation, and TIPS prices may be more volatile than conventionally believed (exemplified by the 2008 and 2020 stock market crashes).