TIPS provide investors with a means to hedge against inflation. TIPS are similar to traditional Treasury bonds in that they pay coupon interest semi-annually. Unlike traditional Treasury bonds, however, the principal of a TIPS bond is adjusted to reflect changes in inflation over the life of the bond. The adjustment in principal moves in tandem with the Consumer Price Index (CPI). Since inflation rates tend to increase over time, these adjustments are generally positive. While unlikely, there can be no guarantees that the CPI won’t decline, in turn causing a negative adjustment to the principal of TIPS. When TIPS mature, they are redeemed at their inflation adjusted principal or their original par value, whichever is greater.
Investors may purchase TIPS directly from the federal government, through a brokerage house that offers individually managed TIPS portfolios, or via a TIPS managed ETF or mutual fund.
401k Rollover Frequently Asked Questions
Here are some answer to your frequently asked questions regarding 401k rollovers.
- What will the stock market do tomorrow, next month, or next year?
- How do I know what my investment return is?
- Why is my 401k such an important benefit?
- How important are taxes when investing?
- What is a 401K Rollover?
- Is there such a thing as a “free lunch” in investing?
- What is an IRA Rollover?
- What is an investment policy statement?
- What do I do after I inherit an IRA?
- What are Treasury Inflation Protected Securities (TIPS)?
- How much risk should I be taking in my IRA rollover and other retirement assets?
401k Rollover Section Menu:
- 401k Rollovers
- Sample Fee Disclosure – Detailed Fee Disclosure
- Investor Resources – Investment Management Process – 401k Rollover Errors
- Common Investing Mistakes – No Guarantees of Continuance – Not All Investors are Experts – Nobody is Perfect – It’s All About Discipline
- 401k Rollover Options – Direct Rollover IRA – Direct Rollover to Your Current Employer’s Retirement Plan – Lump Sum Distribution
- Glossary of Investment Terminology
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