An Introduction to Treasury Inflation Protected Securities (TIPS)

InvestmentsResearch
Written By Mike Mulcahy, CFA® CPWA® CTFA

In 1913, the year Richard Nixon was born, a loaf of bread cost a nickel. By the time he became president in 1969, bread peddlers were demanding five times that much for the same loaf. After Nixon ended the link between the dollar and gold in 1971, inflation soared, doubling the price of bread and other living expenses over the ensuing decade. During that inflationary decade, “risk-free” US 10 Year Treasuries earned negative real returns, eroding fixed income investors’ purchasing power by as much as 20%. As a result, bondholders dependent on a fixed income stream endured a steady decline in their standard of living. It wouldn’t be until the US Treasury began issuing Treasury Inflation-Protected Securities, or TIPS, nearly two decades later that investors would have a tool for such a macroeconomic environment.

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Mike Mulcahy, CFA® CPWA® CTFA

With the founding of Kings Path Partners, Mike brings a diverse set of professional and personal experiences into the wealth services business. His professional roles and community experiences give him a unique and real perspective into the needs of families, entrepreneurs, and business executives. Previous roles include president of a $6B investment management firm; management consultant with McKinsey & Company; VP of corporate finance & strategy with Compaq/HP; and managing director of an entrepreneurial web-based business. He is also an active venture investor with a focus on impact investing and social enterprises.

Mike earned an MBA from the Harvard Graduate School of Business and completed an Executive Program in Portfolio Management at the University of Chicago. He graduated summa cum laude with a Bachelor of Science in Economics with a minor in Chemistry from Texas A&M University. He holds designations as a Certified Private Wealth Adviser®, Chartered Financial Analyst®, and Certified Trust and Fiduciary Advisor (CTFA). He is a member of the Investments & Wealth Institute® and the CFA Society of Houston.

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Kings Path Partners, LLC (KPP) is an SEC-registered investment advisory business based in Sugar Land, Texas. KPP has published this article for informational purposes only. To the best of our knowledge, the material included in this article was gathered from sources KPP believes to be accurate and reliable. That noted, KPP cannot guarantee that this information is accurate and complete and cannot be held liable for any errors or omissions. Readers have the responsibility to independently confirm the information herein. KPP does not accept any liability for any loss or damage whatsoever caused in reliance upon such information. KPP provides this information with the understanding that it is not engaged in rendering legal, accounting, or tax services. In particular, none of this published material should be considered advice tailored to the needs of any specific investor. KPP recommends that all investors seek out the services of competent professionals in any of the aforementioned areas. With respect to the description of any investment strategies, simulations, or investment recommendations, KPP cannot provide any assurances that they will perform as expected and as described in this article. Past performance is not indicative of future results. Every investment program has the potential for loss as well as gain.

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