9. Treasury Inflation-Protected Securities (TIPS)
A TIPS bond, not a tip you would leave a waiter or waitress, is a type of U.S. Treasury bond specifically designed to protect investors from inflation. At Treasurydirect.gov, you can purchase them in $100 increments with a $100 minimum investment. TIPS can also be purchased through a great broker like Ally Invest or TD Ameritrade.
The growth of these bonds can be achieved in two ways. First, there’s a fixed interest rate that doesn’t change over the bond’s lifespan. The second is government-guaranteed inflation protection. As an example, you may want to invest in TIPS today, which offers 0.35% interest rates. Compared to certificates of deposit and even basic online savings accounts, that’s a lot less.
Until you realize your investment value will grow with inflation over the term of the bond and give you a higher return, that doesn’t seem very appealing. TIPS can be purchased individually or you can invest in a mutual fund that, in turn, invests in a basket of TIPS. The latter option makes managing your investments easier while the former gives you the ability to pick and choose with specific TIPS you want.