Fighting Inflation with Inflation-Protected Securities

Inflation-protected securities can help you protect yourself against rising costs over the years. This type of investment is offered by the federal government and is available for purchase by anyone. Here are the basics of inflation-protected securities and how they work.

I Bonds

Inflation-protected securities are also referred to as I bonds. These are essentially a type of savings bond that you can purchase directly from the United States Treasury. This type of bond is designed to pay you a rate of interest that is equal to the amount of inflation in the economy. Many people choose to invest in I bonds because of their simplicity and the ability to help them keep up with inflation.

How They Pay

In order to pay you for the amount of inflation, the United States Treasury uses the Consumer Price Index. The Consumer Price Index keeps track of all of the prices of regular goods and compares them to past pricing information. This tells them exactly by what percentage inflation has risen over a certain period of time. With these types of bonds, you are going to get paid twice a year. The amount of your interest payment will depend on whether the Consumer Price Index says that there has been inflation or deflation. 

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