It’s hard to find a more confusing “safe” investment than the government bonds called TIPS, for Treasury inflation-protected securities—and that includes the taxes on them. But people who avoid them now could be making a mistake, especially if they’re facing retirement.
No wonder investors are bewildered. TIPS say they offer inflation protection, but last year, when inflation roared, many holders of funds with longer-term TIPS had steep negative returns. That’s because TIPS, like other bonds, suffer when interest rates rise.
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