Other options include inflation protection and variable rates
. Treasury Inflation-Protected Securities (TIPS) are issued by the U.S. Treasury, and their principal depends upon the Consumer Price Index. Their principal increases with inflation and decreases with deflation. TIPS appeal to investors who fear that inflation could erode the value of their investment. When TIPS mature, the investor redeems either the original value of the security or the inflation-adjusted value, whichever is greater.5
Investors who can tolerate varying interest payments may decide to buy a variable-rate bond. The return on these bonds reflects the general level of inflation, and commonly rises with rising interest rates.6
Bond investing demands educated decision-making. Fortunately, bonds come in enough varieties that investors can find bonds appropriate for theirtax situation, time horizon, and risk tolerance.