Investing Insights Worried About Inflation? What to Know Before Buying TIPS ETFs
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May 16, 2025 Dan Sotiroff, a Senior Manager Research Analyst at Morningstar, dives into the world of Treasury Inflation-Protected Securities (TIPS) and their ETFs. He explains how TIPS can safeguard investments against inflation and discusses their surprising performance in 2025. Listeners learn about the risks of higher interest rates, the differences between short- and long-term TIPS, and which accounts are best for holding them. Dan also shares his top picks for TIPS ETFs, making it a must-listen for savvy investors seeking stability in turbulent markets.
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How TIPS Protect Against Inflation
- TIPS adjust their principal and interest payments based on inflation measures.
- This mechanism protects investors from inflation eroding bond value over time.
TIPS Bonds vs ETFs Explained
- Buying TIPS bonds directly and via ETFs provides similar total returns at maturity.
- ETFs show real-time price changes reflecting market fluctuations unlike direct bond holdings.
Modest Demand for TIPS ETFs in 2025
- Despite inflation concerns, TIPS ETFs saw modest inflows in early 2025.
- This reflects only marginal increased interest compared to outflows in the same period last year.