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Inflation protected bond funds are one of the best investments out there to help protect your assets from inflation. With the U.S. economy uncertain following the coronavirus pandemic, investors are finding that inflation protected bond funds are the perfect way to guard their money.
Inflation is basically the rate at which prices for goods and services increase over time. Fortunately, inflation protected bond funds have been developed to help investors hedge their portfolio against inflationary risks.
Inflation-protected bond funds offer investors access to a range of bonds, usually from the U.S. Treasury, that are specially designed to protect their values against the harmful effects of inflation. Specifically, these funds typically invest in Treasury Inflation-Protected Securities (TIPS), which are indexed to the Consumer Price Index (CPI).
The real benefit of these funds is that they are built to protect the investor from even high levels of inflation. If the CPI increases, then the values of these bonds increase as well, meaning that the investor's investment will be worth more when the bond matures.
Additionally, inflation protected bond funds are incredibly safe investments. As the bonds are backed by the U.S. Government, there is low default risk and the funds require very little maintenance. This makes them ideal for conservative investors who are looking for a safe, long-term investment with potential for returns above typical interest rates.
Investors should also be aware that inflation-protected bond funds could even potentially outperform their indexes when inflation is high. With a fixed rate coupon, these bonds have the potential to generate returns beyond those available in government bonds.
To conclude, it is clear that inflation protected bond funds offer a significant source of protection against inflationary risk. This makes them perfect for investors looking for a safe long-term investment with the potential for high returns. With a low maintenance factor and potential extra gains, investors can feel confident that their funds are in good hands.