Asset Classes

Treasury Inflation-Protected Securities

Parent Asset Class

Treasury Inflation-Protected Securities are issued by the United States government to provide protection against inflation. They are indexed to inflation to protect investors from a decline in the purchasing power of their money. As inflation rises, TIPS adjust in price to maintain their real value. TIPS will continue paying out twice a year until they mature. They can also be used to diversify an investment portfolio or supplement retirement income.


  • TIPS are a popular asset for both protecting portfolios from inflation and profiting from it because they pay interest every six months based on a fixed rate determined at the bond's auction.
  • The principal value of TIPS rises as inflation rises. 
  • TIPS are considered a low-risk investment because the U.S. government backs them.
  • At maturity, TIPS return the adjusted principal or the original principal, whichever is greater.
  • Some investors prefer to get TIPS through a TIPS mutual fund or exchange-traded fund.
  • Purchasing TIPS directly allows investors to avoid the management fees associated with mutual funds.
  • TIPS payout in two ways: based on an increase in the consumer price index (CPI) and the yield above inflation.
  • They can lose value when the CPI drops, but never to the point where they’re worth less than their face value.

  • TIPS are issued in terms of 5, 10, and 30 years.
  • TIPS Inflation Index Ratios can be used to calculate the Inflation adjustment to principal on previously issued TIPS.
  • TIPS can be held until maturity or sold before maturity.




  • The interest rate offered is usually lower than most fixed-income bonds that do not have an inflation adjustment.
  • Investors might be subject to higher taxes on increased coupon payments.
  • If inflation does not materialize while TIPS are held, the utility of holding TIPS decreases.