Summary
- TIPS mutual funds aren’t diversified. Total Bond Market funds make a better ‘core’ fixed-income investment.
- TIPS prices can be volatile, surprising investors when the prices head down.
- Alternative? Buy individual TIPS and hold them to maturity, along with I Bonds up to the yearly cap.
A lot of investors believe putting money into an ETF or mutual fund holding Treasury Inflation-Protected Securities is a very safe ‘core’ investment. After all, these are investments in U.S. Treasurys, so there is no credit risk.
But there is interest-rate risk and diversification risk, and price swings for these mutual funds and ETFs and be quite dramatic.
Treasury Inflation-Protected Securities 
VERY good points. After I had extolled the value of TIPS a friend invested in Vanguard’s TIPS fund (which I never suggested). When he sustained an 8% loss over a couple months he was shocked at how volatile this “safe” investment could be. There are only a few investment writers who stress the difference between bond funds and bonds but everyone should read them. Larry Swedroe comes to mind. Len