Vanguard Head of Fixed Income Product Jeff Johnson discusses Treasury Inflation-Protected Securities (TIPS) with Wealth host Brad Smith, offering key insights for investors considering this asset class.
Johnson describes TIPS as an "interesting" investment option for those "who are looking to hedge out inflation risk from their portfolios." However, he cautions that TIPS still behave like traditional bonds: "When interest rates go up, that means that TIPS prices can fall." He emphasizes the importance of being "mindful" of these price fluctuations.
For investors considering TIPS, Johnson outlines three key factors to evaluate: The investment time horizon, expected inflation rates, and the strategic role of TIPS in a portfolio. He specifically characterizes TIPS as "insurance," noting the importance of incorporating them "strategically" into a broader investment plan.
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This post was written by Angel Smith