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ETF Specialist

A Less Volatile Approach to TIPS Investing

This ETF offers short-duration exposure to inflation-linked bonds.

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Vanguard Short-Term Inflation-Protected Securities ETF (VTIP) offers short-duration exposure to Treasury Inflation-Protected Securities at a very attractive price. Because TIPS are excluded from aggregate-bond indexes, TIPS funds work well as complementary holdings, especially for investors worried about rising inflation. The fund tracks the Barclays U.S. Treasury Inflation-Protected Securities 0-5 Year Index.

This fund is suitable for investors looking for a long-term holding to hedge against inflation. TIPS returns are driven by interest-rate risk (like nominal bonds) as well as changes in the principal value when the Consumer Price Index is adjusted up or down. A third driver of returns is the change in inflation expectations (not inflation itself).

Brian Moriarty does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.