The Boring Investment That's Suddenly Interesting Again
Treasury Inflation-Protected Securities or TIPS, often fly under the radar of investors, some of which consider them “boring.” But for the 12 months ending July 2026, prices rose 3.4%, according to the Bureau of Labor Statistics.
Meanwhile, the federal government is on pace to borrow $2.1 trillion this fiscal year, per the Congressional Budget Office, $200 billion more than it projected back in February. Put it all together and TIPS are suddenly worth a second look.
Be Smart: How I Built a $1 Million Net Worth Through Smart Investing—And How You Can, Too
Take Action: 11 Subtly Genius Things All Wealthy People Do With Their Money — That You Should Do, Too
What Makes TIPS Different From Other Bonds
The U.S. Treasury adjusts the principal value of a TIPS bond up or down based on the Consumer Price Index. When inflation rises, not only does your principal rise, but so do your interest payments, which are based on your higher, adjusted principal. When the bond matures, you get whichever is higher, the inflation-adjusted amount or your original principal.
This is very different from normal bonds, which pay a fixed amount and whose principal does not change. While a bond’s market price can fluctuate until it matures, the U.S. Treasury cannot actually adjust a regular bond’s principal value.
Investors are attracted to TIPS during periods of rising prices because they are the only type of bond that actually benefits from that scenario.
Why 2026?
TIPS were created in 1997, but the rising inflation of 2026 makes them feel brand-new to some investors. Inflation is cooling more slowly than most forecasts, and in some months it has actually risen. Combined with record government borrowing and the 2026 market environment seems perfect for TIPS.
The iShares TIPS Bond ETF, one of the more widely held funds in the category, was carrying a real yield of 2.28% as of early September, with a 12-month trailing yield near 5%, according to iShares. Real yield matters because it’s the actual return you get above and beyond the rate of inflation. Just a few short years ago, that number was negative.
How To Buy TIPS
You can buy TIPS directly from the U.S. government at TreasuryDirect.gov. They come in increments as small as $100, with maturities of five, 10 or 30 years. Auctions happen several times a year.
If you’re not comfortable buying individual securities on your own, you can invest in an ETF like the iShares TIPS Bond ETF (TIP) or Schwab's U.S. TIPS ETF (SCHP). These funds bundle a range of maturities into a single investment that you can buy or sell any time the market is open. This can be a simpler option than opening a new TreasuryDirect account and buying individual TIPS, but you’ll still get the same type of inflation protection.
The Caveats
As with any investment, there are some potential negatives when it comes to owning TIPS. For starters, if inflation comes in lower than expected, a regular Treasury bond may have paid you more.
Increases in the principal amount of a TIPS security can also create a tax headache, as they are considered taxable in the year of the adjustment even though you don’t actually receive that money until you sell the bond or it matures. For that reason, many investors prefer to keep TIPS inside a tax-advantaged retirement account.
And as with any other bond, if you sell a TIPS before maturity, you're exposed to interest-rate swings, meaning you could receive less than you paid if market interest rates have risen.
However, for well-informed investors, none of that erases the core appeal. TIPS don’t make headlines often because they aren’t high-flying tech stocks that could theoretically quadruple your money. But they do take the guessing game out of whether your money will keep up with inflation, something that matters in a real-world sense.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
More From MoneyLion: