TIPS


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TIPS

Tip

1. Information on a security, company, or anything else provided by one investor or trader to another that is not available to the general public, that can produce significant profits if it proves to be accurate. See also: Inside information.

2. See: Gratuity.

Treasury Inflation-Protected Security

A U.S. Treasury security that protects the bondholder from inflation. Most Treasury securities, like most fixed dollar obligations, pay a fixed coupon rate periodically and mature at par. While this carries low risk, it exposes investors to the possibility that the inflation rate will outpace the interest rate represented on the coupon. In order to protect against this, a Treasury Inflation-Protected Security automatically increases its principal according to the inflation rate as tracked by the Consumer Price Index. Thus, while the coupon rate does not increase, the dollar amount paid does. Because TIPS are so safe, they offer a very low rate of return. See also: Real Return Bond.

TIPS

Inflation-protected security (TIPS).

US Treasury inflation-protected securities (TIPS) adjust the principal twice a year to reflect inflation or deflation measured by the Consumer Price Index (CPI).

The interest rate is fixed and is paid twice a year on the adjusted principal. So if your principal is larger because of inflation you earn more interest. If it's lower because of deflation, you earn less.

You can buy TIPS with terms of 5, 10, or 20 years at issue using a Treasury Direct account or in the secondary market. At maturity you receive either the adjusted principal or par value, whichever is greater.

You owe federal income tax on the interest you earn and on inflation adjustments in each year they're added even though you don't receive the increases until the security matures. However, TIPS earnings are exempt from state and local income taxes.

These securities provide a safeguard against deflation as well as against inflation since they guarantee that you'll get back no less than par, or face value, at maturity.

References in periodicals archive ?
Therefore, if a waiter sold PS1,000 worth of food and drinks, they would have to pay back PS30 in cash, which they are expected to take from their pot of tips.
Japan: Tipping in Japan isn't mandatory, and in many cases tips will be returned.
Restaurants and other hospitality businesses are required to report tips due to their FICA liability.
She estimated the average tip to be between SR2 and SR10, and warned against giving tips for trivial work such as cleaning of toilets or opening of car doors.
Although federal law permits employers to count tips as wages for purposes of meeting their obligation to pay minimum wage to certain "tipped employees," Oregon does not.
Tips and gratuities "intended for an employee" in Prince Edward Island are the property of the employee.
The Daily Mirror backs the campaign and will be naming bosses who do not pass on all tips to their workers.
Women are more likely to favor giving larger tips than men are.
The crime-tip line should be used only for tips about incidents that have already occurred, officials said.
The tips can be removed from the parting line without having to split the cavity block, a design said to allow for ample cooling and safer plastic sealing.
A print-on-demand version of either the Test Methods or the TIPs set, current and updated as of the date printed, is also available.