This week’s exchange-traded fund (ETF), the iShares TIPs Bond Exchange ETF (TIP), invests in U.S. Treasury Inflation Protected Securities (TIPS).
The TIPS are indexed to inflation to protect investors. TIPS are considered to be extremely low-risk because they are backed by the U.S., government and their value rises with inflation.
The fund typically invests 95% of its assets in U.S. government bonds. It also may invest up to 5% of its assets in repurchase agreements (Repos) collateralized by U.S. government obligations or otherwise hold the 5% in cash and cash equivalents.
Following its December 2003 inception, TIP had a roughly 3.5-year head start to build its asset base before ETFs started to really attract the attention of investors. TIP’s first-mover advantage has allowed it to accumulate $22.69 billion in total assets, as well as enjoy a massive average daily trading volume of $148.46 million. In addition to liquidity, TIP’s portfolio is broad and well-diversified.
Click here to read the full article, “This Early-Starter Bond Fund Guards against Inflation.”