Inflation-Protected Securities

Inflation-protected securities mean bonds designed to protect investors from inflation. In simple terms, they are bonds whose value adjusts when inflation changes. Inflation-protected securities are important because they help investors preserve purchasing power when prices rise. In the United States, the most common type is TIPS. For example, if inflation rises, the principal value of certain inflation-protected securities can increase, which can raise interest payments. Inflation-protected securities are not risk-free in every way. Their market prices can still fall when real yields rise.