TIPS

TIPS means Treasury Inflation-Protected Securities. In simple terms, TIPS are U.S. government bonds designed to adjust with inflation. TIPS are important because they help investors protect against inflation reducing the value of money. Their principal adjusts with changes in the Consumer Price Index, and interest payments are based on the adjusted principal. For example, if inflation rises, the principal value of TIPS can increase, helping investors maintain purchasing power. TIPS are not the same as regular Treasury bonds. Regular Treasuries pay fixed principal, while TIPS adjust principal with inflation.