Is investing in TIPS a good idea? Looking for a place to invest my 150k.

Is investing in TIPS a good idea?

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Looking for a place to invest my 150k.

Dmitriy Fomichenko, President, Sense Financial

@dfomichenko • 10/28/15 This answer was first published on 10/28/15. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.

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TIPS provide a hedge against inflation. They pay a guaranteed return above the rate of inflation and come with the backing of the full faith and credit of the U.S. government. They could be a good idea if you are looking for low-risk and guaranteed return. However, TIPS are not risk-free. Even though TIPS are indexed to inflation, they are as sensitive to interest-rate moves as any other bond. When rates rise, TIPS prices will fall. Another risk is deflation, a drop in consumer prices will reduce the principal value of the bond during its life. That means the semiannual interest payments shrink as well. It also means that if you paid more than face value for a bond, you are likely to get back something less at maturity.

In general, it is not a good idea to put all your eggs in a basket. I would recommend talking to a financial planner who can help you put together a well diversified portfolio.

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