Real Assets a Better Tip than TIPS

Real Assets a Better Tip than TIPS
News from NASDAQ:

Even though the S&P 500 was up 16 percent and 2012 delivered some of the best equity returns in more than a decade, investors remain skittish about stock-based mutual funds. Morningstar reports significant inflows for virtually every bond fund category in 2012 while for the fourth consecutive year stock fund outflows continued, totaling $ 34 billion last year.

It is quite understandable that the intense volatility of the equity markets has investors looking for protection from investment risk. Among the vehicles that have found favor with some advisors and their clients are Treasury Inflation Protected Securities (TIPS). These instruments are marketable securities designed to provide protection against inflation whose principal is adjusted according to changes in the Consumer Price Index (CPI). In an inflationary environment the principal increases and in deflation it decreases.

Investors saving for retirement certainly want to protect their investments from eroding in value due to inflation, but it is important that they make an informed choice when arriving at a solution and understand the risks they are taking on. What many fail to realize is that TIPS market prices move substantially along with changes in real interest rates, which means that the share prices of mutual funds investing in TIPS can vary significantly over the short t…………… continues on NASDAQ

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