Where can you safely invest?

Question

Where can you safely invest?

Answer 1

The safest investment in the U.S. are probably Treasury Inflation-Protected Securities, or TIPS, which are backed by the U.S. government (no default risk) and provide protection against inflation (no inflation risk).

The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When a TIPS matures, you are paid the adjusted principal or original principal, whichever is greater.

TIPS pay interest twice a year, at a fixed rate. The rate is applied to the adjusted principal; so, like the principal, interest payments rise with inflation and fall with deflation.

You can buy TIPS from us in TreasuryDirect and Legacy Treasury Direct through non-competitive bidding. Starting in January 2007, the 20-year TIPS is no longer sold in Legacy Treasury Direct, but it continues to be available in TreasuryDirect.