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TIPS on Inflation and Safe Investing

When it comes to low risk investments, its hard to improve upon treasuries, bonds that are fully backed by the U.S. Government. But TIPS, short for Treasury Inflation-Protected Securities, do one better in the safety department than normal treasuries because they also offer a hedge against inflation. The value of TIPS fluctuate in correlation with the Consumer

Articles by Eli Broverman

By Eli Broverman
Co-Founder, Betterment  |  Published: December 18, 2009

Price Index to ensure returns always keep up with inflation. And while a TIPS principal will appreciate with inflation, TIPS also offer a measure deflation protection because the price at maturity is guaranteed to be at least equal to the original principal.

These advantages rank high among the variety of reasons that the Treasury Bond portion of Betterment Accounts is comprised of TIPS. For a full break down of TIPS, check out Phillip Moeller’s article in U.S. News.

And what exactly is the Consumer Price Index? The Consumer Price Index is just one of a multitude of ways to measure inflation, in this case by comparing prices for over 84,000 various goods and services ranging from gasoline and real estate to ham.  84,000 data points is awfully abstract, so check out this interactive graphic to help make sense of things.

Inflation Price Points
Inflation Price Points — Reproduced from nytimes.com

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