Tame Inflation Before It Strikes

You may feel you don't need any insurance against a rise in the cost of living. Inflation, as measured by the Consumer Price Index, is running at negative-1.3% over the past 12 months; with oil and real estate down drastically, there are few signs of rising prices in daily life.

But the cost of living might not fall for much longer. So it is a good time to look at inflation insurance, in the form of U.S. Treasury Inflation-Protected Securities, or TIPS. The principal value of TIPS increases or decreases with the cost of living. Unlike normal bonds, TIPS don't get hammered when inflation rises.

A TIPS fund should be something you invest in for insurance, not for income.

TIPS offer baseline insurance against a rise in all the costs of living. However, TIPS aren't customizable. The official inflation basket consists of

• housing costs (43%),
• food (16%),
• transportation (15%),
• health care (6% ),
• and recreation (6% ),
• apparel (4%)
• education, communication and "other" (3% each).

If the basket of goods and services that you pay for is significantly different from the CPI, then TIPS won't fully insure you.

So think about what makes up your personal inflation mix. If you don't want inflation to ravage your retirement plans, contact us a call to discuss an investment protection plan for your portfolio.

Read the entire article by JASON ZWEIG in the WSJ