There is an important thing to understand: The funds might not pay a dividend, depending on the CPI. For example, Yahoo Finance will tell you that TIP yields 5.89%. That isn't what you will get -- that number is based on the past year's dividends. Over the next year, the yield will be more or less, but to give you some idea of what to expect, TIP hasn't paid a dividend since October 2008.

The decision to buy now shouldn't come down to the current yield, but to your expectations about the consequences of the Fed's actions and what it could do to prices and, by extension, the other fixed-income instruments in your portfolio. For years, we have been living with a manageable rate of inflation, but that may change soon. As for me, for most clients, I allocate 15% to 20% of the fixed-income portion of their portfolio with iShares Barclays TIPS Bond Fund.

 

 

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