Question

A security issued by the u.s. government that protects the investor from inflation is called a:____.

Answer 1

A security issued by the U.S. government that protects the investor from inflation is called a Treasury inflation protected securities

   Treasury inflation-protected securities (TIPS) are a type of Treasury security issued by the U.S. government. It provides protection against inflation. The principal if Treasury inflation protection securities increases with inflation and decreases with deflation. This is measured by the consumer price index. When it matures you pay the adjusted principal or the original principal, whichever is greater. Treasury inflation protected securities are asset as they do both, protect from inflation and profit because they pay interest every six months.

   They are issued with maturities of five, ten, and thirty years and are considered as a low risk investment because the U.S. Government backs them. It can be purchased directly from the Government through the treasury direct system or through exchange traded funds. Purchasing directly, however allows investors to avoid the management fees associated with mutual funds.

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