Painful Truth: Inflation Protection Has Been A Losing Bet

Summary

  • Inflation over the last 10 years has averaged just 1.8% a year, much lower than investors were predicting in 2010.
  • Investing in Treasury Inflation-Protected Securities is a “bet” that inflation will run higher than expected, or at least match expectations.
  • TIPS have consistently underperformed nominal Treasurys in the last decade because inflation remained stubbornly low.

I’ve been writing about inflation-protected investments – Treasury Inflation-Protected Securities and U.S. Series I Savings Bonds – since 2011, and I’ve been investing in these products since 1999. So today I am going to take a look at how these investments have been doing. The answer is: Not so well.

Read my full analysis at SeekingAlpha.com

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About Tipswatch

Author of Tipswatch.com blog, David Enna is a long-time journalist based in Charlotte, N.C. A past winner of two Society of American Business Editors and Writers awards, he has written on real estate and home finance, and was a founding editor of The Charlotte Observer's website.
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2 Responses to Painful Truth: Inflation Protection Has Been A Losing Bet

  1. Cathy says:

    Great article!

  2. john sims says:

    First: thanks for posting your series re: TIPS. this is info that was and is hard to find/impossible to find otherwise. I’ve learned so much from your blog and articles!

    Second: I don’t feel like I’ve “lost” investing in TIPS. (and certainly don’t harbor any bad feelings towards the messenger). I’ve invested in TIPS for inflation protection and they’ve done what I’ve wanted them to do–preserve some of my retirement savings very safely with a real return and done better than the CD’s or treasuries that I could have bought _at the time_.

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