No. of Recommendations: 5
Interesting article; rising interest rates equals real bad news for TIPS.

I don't read anything related to Cramer, who I consider a crook, even if quoting someone from Vanuard.

First, if you are buying TIPS, you aren't, or should be, doing it for trading purposes.

And noting that the growth in principal on TIPS from the CPI adjustment has less of an impact than change in TIPS fixed yields on the salable value of a TIPS is,, well, yawn.

Remember out general precaution about bond funds is that increases in yield on a fund won't make up for loss on NAV in a rising interest rate environment: it's the same basic idea.

It's certainly worth warning people who don't know it already that inflation adjustments won't make TIPS a good sale in a rising interest environment, but it is really obvious to anyone who understands how the value of bonds changes with changing prevailing yields. In general, TIPS are likely to be less susceptible to changing interest rates, because some of the change usually reflects changing perceptions of inflation going forward not just "real" interest rates. But it can happen that all the change in let's say a 10-year Treasury's yield comes from changed perception in future inflation while the fixed yield on TIPS remains the same.
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