What are they? Treasury Inflation-Protected Securities (TIPS) are U.S. government bonds designed to help protect investors from inflation. Their principal value adjusts periodically based on changes in the Consumer Price Index (CPI).
Why are they important? Inflation can reduce purchasing power over time. TIPS are designed to help offset that risk by increasing in value as inflation rises.
How do they show up in real life? Investors often incorporate TIPS into fixed-income portfolios when inflation concerns increase or when preserving purchasing power is a primary objective.
Bottom line: TIPS provide investors with a way to maintain exposure to U.S. government bonds while helping protect against the long-term effects of inflation.
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