Here’s a Big Tip: TIPS Aren’t Perfect In Battling Inflation

Inflation-protected securities are often seen as an easy way to defend against both rising and falling inflation. But that may not always be the case for those who invest in them through mutual funds.

The most common inflation-protected securities are U.S. government-issued Treasury inflation-protected securities. TIPS offer coupon payments and a yield at maturity that changes along with the consumer price index. Essentially, investors get paid more as inflation rises.
They also provide a defense against deflation, a subject now on the minds of many investors with the CPI heading into negative territory. If the CPI adjustment takes the principal at maturity below the bonds’ face value, the Treasury will still repay par value. For these reasons, individual TIPS held to maturity make sense for many investors. Wall Street Journal article