Summary
I bonds are Treasury bonds that pay a fixed rate of interest as well as another layer of interest that varies with the current inflation rate. The inflation adjustment is made twice a year. I bonds are available only to individuals and they’re available with face values as low as $25.
TIPS’ principal values are adjusted to incorporate the current inflation rate, whereas I bonds receive an adjustment in their interest rates to reflect inflation. The fact that you can sell TIPS to other investors also allows you to capitalize on price changes in the bonds. The tax treatment of TIPS is a major disadvantage.
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