How to TIPs
A low-risk alternative for savers
Suppose you have a retirement plan and are at or near retirement, or you are a financial advisor who works with clients interested in a low-risk investment with built-in protection against inflation risk.
If you have 40 minutes, Jay Abolofia’s instructional video on investing in Treasury Inflation-Protected Securities is very well done. It even shows how to build a “TIPS ladder,” which caught my attention.
Yesterday, I put this to the test and structured a ladder. I loved being the student and learning the ease with which I could structure a ladder or, well, in my case, a taller stool. Sharing today with subscribers who want to learn more.
TIPS are not new; they've been around for a while. They're issued by the U.S. Treasury and sold on the secondary market (you need a brokerage or an individual retirement account).
The typical reasons why households might use TIPS:
They have spending needs to cover.
They have retirement assets invested in the stock market and are ready to lighten your risk.
They worry about future inflation.
Treasury Inflation Protected Securities (TIPS) offer a compelling solution to items 1 through 3.
More on TIPS and economics-based financial planning in our book, which is included with a paid subscription.
P.S. - If you work with a financial advisor, please share Personal Finance Economics and encourage them to subscribe. They can add economics-based financial planning to their wheelhouse and help you make best-case, non-investment financial decisions. It is the future.
Great post and really appreciate link to tutorial...it is really good!
Great tutorial! The caveats he covers are really helpful.