Inflation-Protected Securities (TIPS) are a type of U.S. Treasury bond designed to protect investors from inflation’s eroding effects. Unlike regular bonds, TIPS have a principal value that adjusts with changes in the Consumer Price Index (CPI), ensuring that the investment’s purchasing power is maintained over time.

The primary benefit of TIPS is their ability to provide a hedge against inflation. As inflation rises, the principal amount of TIPS increases, resulting in higher interest payments and a greater payout at maturity. This feature makes TIPS an attractive option for conservative investors seeking to preserve capital in an inflationary environment.TIPS also offer the security of being backed by the U.S. government, making them one of the safest investment options available. They are particularly suitable for long-term investors, such as those saving for retirement, who are concerned about inflation eroding their savings’ value over time.Investors can purchase TIPS directly from the U.S. Treasury or through mutual funds and exchange-traded funds (ETFs) that specialize in these securities. By including TIPS in a diversified portfolio, investors can achieve a balanced approach to managing inflation risk while pursuing their financial goals.