In times when inflation is threatening the value of your dollar you want to hedge against its effects by putting your money in the right places.  One way of doing this is to add TIPS to your portfolio.

TIPS is an acronym for Treasury Inflation Protected Securities. TIPS are issued by the US Department of Treasury and pay interest twice a year. Owning them is virtually risk free since they are backed by the US government. They are sold in increments of $100 for either 5, 10, or 20 year periods and can be purchased directly through the US Treasury at www.treasurydirect.gov.  They can also be purchased through a bank or broker.

Here’s how they work: