In an effort to deliver world-class educational offerings, IMCA provides fresh, compelling, relevant content for the investment consulting and wealth management industry. These offerings are updated monthly and focus on four key topic areas: institutional consulting, wealth management, investment trends, and best practices. Return each month to explore the newest contributions.

---

The Long-Term Case for TIPS: Inflation Protection and Diversification
for Multi-Asset Portfolios
Published in Investments & Wealth Monitor, November/December 2008

Inflationary periods, even those marked by relatively modest inflation, can have two devastating effects on investment assets. First, there is the impact of rising prices on real spending power. If an investor retires at age 65 and lives to the age of 90, $100 of savings at retirement would be worth $53 at the end of that period assuming 2.5-percent inflation. If inflation averaged 5 percent, the $100 would be worth just $28. Second, notwithstanding the current environment of market and economic extremes, inflationary periods also typically are periods of equity-market underperformance. So as real spending power is declining, total portfolio value may be as well . Treasury inflation-protected securities (TIPS) provide a solution on both counts by offering a hedge against inflation and improving a portfolio’s diversification in down equity markets. Read the article.