The final sub-group is a catch-all group and coincidentally includes both the year’s best and worst performers. The SPDR Citi International Government Inflation-Protected Bond ETF (WIP), which offers exposure to European inflation-protected government bonds, is the best performing TIP ETF year-to-date with a return of 9.71 percent through August 14. There are also ETFs that track indices targeting duration, like the FlexShares iBoxx 5-Year Target Duration TIPS Index Fund (TDTF). Finally, the worst performer year-to-date, the UltraShort TIPS ETF (TPS), was down 5.27 percent. The fund, which makes money when the Barclays Capital US TIPS Index falls, also charges the highest fees for the category with an expense ratio of 0.95 percent.
The Bottom Line
TIPS may not be the most exciting security, particularly because global inflation has been unswervingly low. But the market’s complacency that inflation will remain below target for the foreseeable future is the reason that TIPS should be considered. The erosion of capital from unexpected inflation can supervene, and its impact may be immediate and hugely negative.