Michael J Porro & Company

Financial Advisors, LLC

180 Old Tappan Road, Old Tappan, NJ 07675-7052

Phone: 201-768-0218

Fax: 201-768-6487

Website: porrofinancialadvisors.com

July/August 2018

Investing in TIPS

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Tips, an acronym for Treasury Inflation- Protected Securities, are fixed income investments designed to provide a hedge against the eroding effects of inflation. Issued by the U.S. Treasury and backed by the full faith of our federal government, TIPS are available directly at https://www.treasurydirect.gov. You can also find them in some mutual funds.


How They Work
Like any bond, TIPS are guaranteed when you hold them until maturity. Because they are tied to the Consumer Price Index (CPI), which measures inflation, these securities feature returns that rise during inflation, but decrease during deflation, meaning you can also lose money with them.


No Guarantees
There are no such guarantees for bond funds that feature TIPS. They can lose value when bond fund managers sell them before maturity.


You can buy TIPS directly for as little as $100 for terms of five, 10, and 30 years. Interest and increases in the principal are subject to federal tax but exempt from state and most local income taxes.


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