Jason Zweig makes an excellent observations in his April 30 Intelligent Investor column in the Wall Street Journal: Don’t trust the yield quotes you see for some (not all) TIPS mutual funds.

Among the 173 TIPS mutual funds tracked by Morningstar, the reported “SEC yields” as of March 31 ranged from minus-0.77% to 5.58%, with 12 funds yielding at least 5%. Four of the seven exchange-traded funds that specialize in TIPS displayed yields greater than 5%, with Pimco 15+ Year U.S. TIPS Index leading the pack at 6.07%.

Yet no TIPS yield more than 1.75%. How could anyone but an alchemist generate 5% or more out of 1.75% or less?

The answer lies hidden in the term “SEC yield.”

In theory, since inflation can jump in a single month, as is did recently to 0.5%, you could annualize that rate to look like inflation is running at 6%, which it isn’t.

Take a look at the iShares TIP ETF, which can demonstrate the issue. On the fund’s data page, the 30-day SEC yield is listed as 5.59% — accurate but misleading. On the other hand, iShares also lists the Average Real Yield to maturity as 0.2% and the 12-month yield as 2.76%.

The data page for the Vanguard Inflation-Protected Securities Fund Investor Shares (VIPSX) intentionally underestimates its annualized yield, which is a ‘miserable’ -0.09%. But on Vanguard’s Website a box also pops up when you mouse over that rate:

The yield quoted is the real yield, or the yield before adjusting for inflation. The actual yield of Vanguard Inflation-Protected Securities Fund will be a combination of the real yield and an inflation adjustment. A complete estimate of the fund’s yield requires that an estimate of future inflation be added to the real yield. Because inflation fluctuates, it cannot be projected into the future precisely enough to be included in the yield quote. The inflation adjustment is based on changes to the Consumer Price Index (CPI) and can be either positive or negative, based on the change to the CPI. Investors interested in maintaining the purchasing power of their investment should invest their dividend distributions.

Vanguard is doing this right.