What should I know before investing in inflation-protected securities funds vs bond funds?

Answer by  cynosure (376)

Bonds that are not inflation-protected devalue in inflationary environments - their coupons remain constant as inflation rises, which causes them to trade at discount to face. TIPS' coupons adjust with inflation, and thus their value will not fluctuate as severely. But with that safety, you will lose some income, because you are paid to accept risk on an unprotected bond.

Answer by  vikkyrs (377)

Treasury Inflation-Protected Securities funds or TIPS differ from the conventional bonds. It protects returns against devaluation if inflation should occur. The returns on these bond funds are lower relative to others.