Brett Arends’s ROI: Why TIPS might be a smart place to park some money right now

by | Sep 26, 2022 | Stock Market

Do want to take a bet? Inflation is running at 8% or higher, depending on how you count it (and who’s counting). The Federal Reserve is clearly panicking. And the markets are clearly panicking too. So at this point, Uncle Sam would like to offer you a bet.

How would you like to wager your hard-earned retirement savings that inflation is going to collapse in very short order, and collapse so far, so fast that over the next five years the average will be less than 2.4%? Read: Market Snapshot Oh, and to make the bet even more interesting, here are some additional terms: If you win the bet, and average inflation comes in below 2.4% between now and 2027, you will make a very small profit—but if you lose the bet you could lose, and lose big. How does that sound? Tempted? If this sounds completely nuts to you, you are not alone. It sounds pretty nutty to me too. But here’s the sting in the tail: You may already be making this bet, without even knowing it. Actually, the more cautious and risk-averse you are, the likelier you are to be taking this bet. Yikes! I am talking about investments in U.S. Treasury bonds. With inflation nudging toward double digits, 5 year Treasury bonds
are paying 4% interest and 10 year Treasurys
3.7%. The longest-dated bond, the 30 year, is paying 3.6% …

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