TIP ETF Review: Is iShares TIPS Bond ETF Worth Buying?

iShares TIPS Bond ETF provides exposure to U.S. Treasury Inflation-Protected Securities, whose principal adjusts with CPI — the only government-guaranteed instrument that explicitly protects purchasing power against inflation, making it a foundational building block for real-return portfolios.

Last updated: 2026-02-02 · Data: Yahoo Finance, fund prospectuses, SEC filings

What Is TIP?

The iShares TIPS Bond ETF tracks Treasury Inflation-Protected Securities (TIPS) — U.S. government bonds where the principal adjusts with inflation as measured by CPI. BlackRock manages this ETF, which follows the Bloomberg U.S. Treasury Inflation-Protected Securities Index. TIPS pay a fixed real rate plus whatever inflation does to the principal.

Expense Ratio: 0.18% | AUM: $13.9 billion | Inception: 2003

Current Snapshot

Why It Matters for Real Asset Investors

TIP sits at the foundation of real asset allocation because it solves the core problem: how do you preserve purchasing power when governments debase currency? While gold gets the headlines and real estate gets the allocation, TIPS offer mathematical certainty — your principal rises dollar-for-dollar with official inflation.

This matters because real assets perform best during inflationary regimes, but they're volatile. Energy infrastructure might double during a commodity super-cycle, but it can also drop 30% in six months. TIP provides the stable real return that lets you take calculated risks elsewhere in the portfolio.

The current 3.46% real yield represents attractive compensation for inflation protection. When real rates were negative in 2021-2022, TIP struggled as investors paid the government for the privilege of losing purchasing power. Now, with positive real yields restored, TIP offers both income and inflation protection — exactly what real asset investors need as a portfolio anchor.

Top Holdings

TIP holds the full spectrum of TIPS maturities, from 2027 to 2054. The largest positions typically include:

• TIPS 0.125% 2033: Ultra-long duration for maximum inflation sensitivity
• TIPS 0.375% 2027: Shorter duration, lower volatility
• TIPS 0.625% 2043: 20-year maturity capturing long-term inflation expectations
• TIPS 0.875% 2029: Medium duration with higher coupon
• TIPS 1.375% 2032: Higher real yield from earlier issuance

The portfolio spans maturities from 5 to 30 years, with average duration around 7-8 years. This means TIP moves inversely to real interest rates — when real rates fall (inflation expectations rise faster than nominal rates), TIP rallies.

How It Fits the Portfolio

TIP serves as the "risk-free" real asset in a portfolio otherwise filled with volatile energy, infrastructure, and commodity plays. While uranium miners and pipeline stocks chase 20%+ returns, TIP delivers predictable real returns plus principal protection.

Position sizing depends on regime. During disinflationary periods, keep TIP at 5-10% for optionality. When inflation accelerates above 4%, TIP can expand to 15-20% as both protection and tactical play. The key insight: TIP isn't just insurance — it's a momentum trade on inflation expectations.

Pair TIP with shorter-duration real assets like energy stocks and REITs. While TIP captures long-term inflation protection, energy responds immediately to commodity price moves. This combination provides both immediate inflation response and long-term purchasing power protection.

Regime Signals

TIP outperforms during three specific conditions: rising inflation expectations, falling real interest rates, and currency debasement concerns. The sweet spot occurs when nominal inflation runs above 3% while the Fed remains behind the curve.

Watch the 5-year, 5-year forward inflation expectation rate (5y5y). When this metric rises above 2.5%, TIPS typically outperform nominal bonds by 200-400 basis points annually. Conversely, when deflation fears dominate (5y5y below 1.5%), TIP underperforms as investors prioritize nominal yield over inflation protection.

The current environment favors TIP: structural inflation pressures from deglobalization, energy transition costs, and fiscal dominance create persistent upward pressure on prices. With real yields positive but not excessive, TIP offers attractive risk-adjusted returns for the inflationary regime ahead.

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Frequently Asked Questions

How do TIPS work?

Treasury Inflation-Protected Securities adjust their principal value based on changes in the Consumer Price Index (CPI). When inflation rises, the principal increases, generating higher coupon payments and a larger repayment at maturity. TIP holds a diversified portfolio of TIPS across multiple maturities, providing broad exposure to this inflation-adjustment mechanism. The fund effectively pays investors a real (after-inflation) yield set by the market.

What is the expense ratio of TIP?

TIP charges 0.19% annually, which is very competitive for a TIPS fund and reflects iShares' scale advantages. The fund holds over $20 billion in assets and is the most liquid TIPS ETF available. Alternative TIPS vehicles from Vanguard (VTIP) and Schwab (SCHP) offer comparable or lower fees, but TIP's deep liquidity and options markets make it the institutional standard.

Is TIP a good inflation hedge?

TIP provides the purest government-guaranteed inflation protection available — principal and coupons adjust directly with CPI. However, TIP's market price can decline even during inflationary periods if real interest rates rise (as occurred in 2022 when inflation was high but the Fed hiked rates aggressively). TIP protects against inflation at maturity, but mark-to-market losses during the holding period can be significant during rate-hiking cycles.

How does TIP compare to commodities for inflation protection?

TIP and commodities both hedge inflation but through different mechanisms. Commodities (PDBC, DBC) provide direct exposure to the goods whose prices ARE inflation — they can rally dramatically during inflation spikes but also crash during deflation. TIP provides a more moderate, government-backed inflation adjustment that never goes negative (the CPI floor prevents deflation losses at maturity). Energy Macro uses both: TIP for base inflation protection and commodities for amplified commodity inflation exposure.

For our complete allocation framework across real assets, infrastructure, and income strategies, see The Blackout Fortune Playbook.

Last updated: February 1, 2026 | Data: Yahoo Finance, BlackRock