Inflation Protected

AAA

DEFINITION of 'Inflation Protected'

The types of investments that provide protection against inflation or the rise in prices of goods and services. Most hard assets are typically protected against inflation. This is because commodities tend to appreciate during times of high inflation.

INVESTOPEDIA EXPLAINS 'Inflation Protected'

Certain funds are also created to protect investors from the negative effects of inflation. These funds focus on investing in securities that bring a real return, which is the return on an investment, minus the reduction in its value as a result of inflation. These funds also invest in bonds backed by the federal government. The funds' principal is adjusted quarterly based on the current inflation rate.


The Treasury Inflation Protected Securities (TIPS) is an example of this. The principal portion of this security increases with inflation and decreases with deflation in accordance with the Consumer Price Index (CPI). At maturity, the adjusted or original principal is paid; whichever amount is higher.

RELATED TERMS
  1. Consumer Price Index - CPI

    A measure that examines the weighted average of prices of a basket ...
  2. Inflation-Indexed Security

    A security that guarantees a return higher than the rate of inflation ...
  3. Consumer Price Index For All Urban ...

    A measure that examines the changes in the price of a basket ...
  4. Inflation

    The rate at which the general level of prices for goods and services ...
  5. Deflation

    A general decline in prices, often caused by a reduction in the ...
  6. Inflationary Psychology

    A state of mind that leads consumers to spend more quickly in ...
Related Articles
  1. Entrepreneurship

    Cost-Push Inflation Versus Demand-Pull Inflation

    Gain a deeper understanding of aggregate supply and demand, forces which raise the price of goods and services.
  2. Economics

    Forces Behind Interest Rates

    Get a deeper understanding of the importance of interest rates and what makes them change.
  3. Investing Basics

    Beta: Gauging Price Fluctuations

    Learn how to properly use this measure that can help you meet your criteria for risk.
  4. Bonds & Fixed Income

    Curbing The Effects Of Inflation

    Your investments suffer when general price levels rise. Learn how you can control the damage with IPSs.
  5. Economics

    What You Should Know About Inflation

    Find out how this figure relates to your investment portfolio.
  6. Options & Futures

    Introduction To Inflation-Protected Securities

    Inflation is an enemy to investors - except to those who invest in IPS, which guarantee a real rate of return with no credit risk.
  7. Retirement

    Inflation-Protected Annuities: Part Of A Solid Financial Plan

    If you worry about inflation and longevity risks, this may be the investment for you.
  8. Economics

    Iron Ore Market: Falling Into The Hands Of A Few

    The big iron ore mining companies have embarked on a drive to increase supply, reduce cost, and take market share.
  9. Economics

    What is Deflation?

    Deflation is an economic term used to describe a period of declining prices for goods and services. Decreases in the money supply, government spending, consumer demand and business investment ...
  10. Chart Advisor

    Commodity Traders Are Using Momentum To Profit From These Stocks

    Active traders are drawn to momentum strategies. These momentum winners of 2015 are worth a trader's second look.

You May Also Like

Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  3. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  4. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  5. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  6. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
Trading Center