Friday, May 6, 2011

Why You Shouldn't But TIPS.

Want a sure-fire, guaranteed way to lose money? Buy TIPS.

"But wait!", I hear you say , " TIPS are mean to provide a sure-fire way to preserve the value of your money. How can this be?"

Treasury Inflation-Protected Securities, known as TIPS, are U.S. government bonds that offer a guaranteed rate of return above the rate of inflation.

I should say above the official rate of inflation.

Therein lies the problem. The official rate of inflation is much lower than the real rate of inflation. So while millions of people think they are investing their money in a safe vehicle, locked away from loss by inflation, they are actually guaranteeing they will lose money after inflation!

Consider that the official inflation rate is currently around 2.7%. Meanwhile, compared with a year ago, the price of milk is up 7%, beef is up 14%, citrus is up 8.5% and gasoline is up 28%. Consumer electronics, like televisions, iPods and iPads are becoming cheaper, but you can't eat those and they won't get you to and from work.

The entire TIPS system is based on a statistic that is manipulated by the government. It's a money maker for the government at the expense of people. Like inflation itself, TIPS are just another way for the government to pick your pocket without you knowing it!



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