Quantcast

Treasury Inflation-Protected Security (TIPS)

Definition:

First issued by the U.S. Treasury in 1997, these Treasury bonds attempt to protect investors against fluctuations in inflation by linking the principal amount to the consumer price index. Each year, the principal is adjusted by the inflation rate during the previous year. The index for measuring the inflation rate is the non-seasonally adjusted U.S. City Average All Items Consumer Price Index for All Urban Consumers (CPI-U), published monthly by the Bureau of Labor Statistics (BLS). These bonds are taxable. Indeed, one must pay tax on both the interest and the increase in principal. TIPS are one of two types of inflation-indexed securities sold by the U.S. Treasury; the other type is Series I Savings Bonds.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Coattail investing

A risky trading practice of making trades similar to those of other successful investors, usually institutional investors.

Subscribe to the Term of the Day via email Get the Term of the Day in your inbox!





Create your free portfolio




Investing Tools

stock screener icon
Stock Screener

Find opportunities in the market using criteria based on 145 data elements.

portfolio tracker icon
Portfolio Tracker

Create a portfolio of selected assets that are updated dynamically intraday.

guru icon
Guru

Evaluate stocks that meet the investment criteria of the greatest investors.