No. of Recommendations: 0
I suppose I need some help understanding TIPS.

If I buy at Auction on Tuesday a $1000 TIP at a coupon rate of 2.125%
then 6 months later they apply an inflation increase of say example 1/2 of 3% = 1.5% per year to the principal.

So, $1000 plus 1.5% inflation = 1015 x ( 1/2 x 2.125%)= $1025.78
For a return of 2.58% for the first 6 months or looking forward to one year about 5.2%.

Assuming I have the basic math down , it appears the only upside to buying TIPS would be if inflation was to be 4% or better. Otherwise wouldn't CD's be just as good?

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.