A big jump in consumer prices has some experts worrying that inflation is inevitable, despite calming statements from the Federal Reserve and White House.
In this photo provided by the New York Stock Exchange, trader Frank O’Connell works on the floor, Tuesday April 13, 2021. Stocks were choppy and mixed in late morning trading Tuesday as a drop in bond yields hurt bank stocks but helped big technology stocks. (Nicole Pereira/New York Stock Exchange via AP)
MANHATTAN (CN) Consumer prices saw the biggest jump since August 2012 on Tuesday, leading some experts to worry that federal regulators are not taking inflation seriously enough.
Which Bonds Provide the Biggest Diversification Benefits?
morningstar.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from morningstar.com Daily Mail and Mail on Sunday newspapers.
The 9 Best Safe Investments You Can Find With High Returns
gobankingrates.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from gobankingrates.com Daily Mail and Mail on Sunday newspapers.
What You Need to Know
Fear of inflation is taking root as government stimulus and renewed economic growth pump interest rates.
Broad and narrow baskets can be helpful, to a point.
Dividend-growth stocks can be the best inflation beaters in long-term holds.
The increasing fear of rising inflation has some pundits discussing and advisors wondering what options are available for retirees to protect their nest eggs in case the inevitable happens.
In a recent column, Christine Benz, director of personal finance for Morningstar, pointed out that the large amounts of fiscal stimulus and a resurgent economy are fodder for worries about renewed inflation. She writes that “the so-called break-even rate the differential between what nominal 10-year Treasury bonds and Treasury Inflation-Protected Securities yield recently shot up to 2.3%.”
KXLY
April 13, 2021 6:05 AM Brian O Connell - Forbes Advisor
Posted:
Updated:
April 15, 2021 4:37 AM
Treasury Inflation Protected Securities, or TIPS, are bonds issued by the U.S. government that offer protection against inflation plus modest interest payments.
“Many investors save and invest so they can spend in the future,” says Wes Crill, head of investment strategists at Dimensional Fund Advisors in Austin, Texas. “For investors prioritizing preservation of purchasing power, TIPS can contribute to that goal by mitigating the impact of unexpectedly high inflation.”
How Do TIPS Work?
As fixed income securities, TIPS work a lot like the bonds you’re already familiar with. You purchase debt issued by the U.S. government, and receive regular interest payments on the face value, or the par value, of the securities. When the TIPS’s term is up, you are repaid the original amount loaned to the government.