What strategy might an investor employ if they are concerned about rising inflation?

An investor concerned about rising inflation would logically choose to purchase Treasury Inflation Protected Securities (TIPS). TIPS are government bonds specifically designed to protect against inflation. They adjust both their principal value and interest payments based on changes in the Consumer Price Index (CPI), which measures inflation. As inflation rises, so does the principal of TIPS, ensuring that the purchasing power of the investment is preserved. This makes TIPS a compelling choice for investors looking to guard against the adverse effects of inflation on their investment returns.

While other investment choices may have their merits in different economic conditions, they do not provide the same level of direct protection against inflation that TIPS offer. For instance, mutual funds, high-yield corporate bonds, and real estate may perform well or poorly depending on various factors, but they do not inherently adjust for inflation in the way that TIPS do. This characteristic makes TIPS a unique and valuable investment for inflation-conscious investors.