In the example you gave above milk went up 40%. The “official “ rate of annual inflation is 3%. Even when adding 2% for TIPS real return did they “protect “ one from the price increase?
Hello OP,
Did TIPS funds protect you from your personal inflation? If not would holding individual TIPS till maturity do the same? That would require your personal inflation expenses to match what the "official" inflation rate is determined to be. If your personal inflation rate of expenses exceeds the officially determined rate then TIPS will help but not "protect" you.
Don’t confuse changes in consumption levels or personal expenditures with inflation.
Inflation = “last year a gallon of milk costs $2.50, this year the same gallon costs $3.50”
Changes in consumption = “I switched from regular milk that costs $2.50 to organic milk that costs $4.50.”
To a first order, TIPS can/will/have protected people from the former.
Unless one’s spending on fixed expenses matches CPI + TIPS yield annually then additional income will be necessary. Everyone’s expenses are obviously not the same as an average amount determined by the BLS.
Statistics: Posted by rossington — Sun Feb 16, 2025 12:32 am — Replies 90 — Views 8061