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HOW TO: Hedge Against Inflation
REVEALED: Best Investment During Inflation
HOW TO INVEST IN GOLD: Gold IRA Investing
HOW TO INVEST IN SILVER: Silver IRA Investing
Inflation-protected bond funds, also known as Treasury Inflation-Protected Securities (TIPS) funds, are a type of investment vehicle that can help protect your portfolio against the eroding effects of inflation. Inflation is the rate at which the general level of prices for goods and services is rising, and it can have a significant impact on the purchasing power of your money over time. Investing in inflation-protected bond funds can help mitigate the negative effects of inflation on your investments.
One of the key benefits of inflation-protected bond funds is that they offer a guaranteed return that adjusts for inflation. Unlike traditional bonds, which pay a fixed interest rate, TIPS pay interest based on a fixed interest rate plus the rate of inflation. This means that as inflation rises, the value of your investment will also increase, helping to preserve your purchasing power over time.
Another benefit of investing in inflation-protected bond funds is their low correlation with other asset classes, such as stocks and traditional bonds. This can help reduce the overall volatility of your portfolio and provide a stable source of income, even during times of economic uncertainty.
However, there are some potential downsides to investing in inflation-protected bond funds. One of the main drawbacks is that they typically offer lower yields compared to other types of fixed income investments. This is because the rate of return on TIPS is adjusted for inflation, so the interest payments may be lower than what you could earn with traditional bonds.
Additionally, inflation-protected bond funds are sensitive to changes in interest rates, which can impact their performance. If interest rates rise, the value of TIPS may decrease, leading to potential losses for investors. It’s important to consider your investment goals and risk tolerance before investing in inflation-protected bond funds.
In conclusion, investing in inflation-protected bond funds can be a useful strategy for protecting your portfolio against the effects of inflation. These funds offer a guaranteed return that adjusts for inflation, as well as low correlation with other asset classes. However, it’s essential to carefully consider the potential risks and drawbacks before making any investment decisions. Consulting with a financial advisor can help you determine if inflation-protected bond funds are the right choice for your investment portfolio.
How about purchasing I-Bonds from Treasury Direct as part of your cash holdings? It has an interest component and an inflation component. The interest component isn't paying anything, but the inflation component is paying 7.2% apr (3.6% for 6 months). You can purchase electronically $10000 for a single person and $20000 for a married couple. You can also purchase $5000 per person paper through your tax return, though this seems a little more complicated. It sure beats what you can get from a savings account.
The worst part of TIPS is paying taxes every year for the inflation adjustment, but do not get tax credit or deduction for deflation.
excellent video. I look forward to watching you do the comparisons in your next series of videos.
I'll stay away from bond mutual funds for now. I'll stick with invest in US Treasury I Bonds. They are like a rolling 6 month CD IRA that resets to CPI inflation. Bought 10k for me and 10k for the wife here in November. And will buy another 10k each again in January. With anti-fossil fuel Joe going to keep inflation high for the near future, I see I Bonds as a no brainer for a place for people to put long term emergency funds (just gotta get past 1 year and it's liquid) or a place where retirees and near retirees can build up their cash bucket. An advantage I Bonds have over bond mutual funds….I am guaranteed my full principal balance anytime after 1 year. Bond mutual funds can't give me that guarantee.
Old one uploaded but still one of my favorites.