TIPS duration

See

CPI adjustment is the same regardless of maturity, but there is another component to the return which still differs, based on maturity, similar to the difference of 1 yr T-Bills vs 10 year notes. Note: the word 'duration' has a specific meaning, you want to use the word 'maturity' as I read your question. A quick google will find adequate definitions for both words.

Joe

Maturities. Not durations. There's a world of difference, at least to bond people.

Duration is a measure of the sensitivity of the price of a bond versus the prevailing interest rates. The problems, however, are numerous - what's the right rate, for example to look for changes? In the case of TIPS, if you use the "real" rate, they look like they have much longer durations (higher sensitivies) than do normal treasuries (whose durations are measured against the nominal yields on fixed-rate treasuries). That's because the nominal rates and the real rates are different and bonds with lower interest rates have longer durations (zero-coupon bonds, for example, have longer durations than regular coupon- paying bonds of the same maturity).

That doesn't really answer your question, though. It appears that you are talking more about maturities than about durations, though there are some overlapping issues.

It depends a little on what role those bonds have in your portfolio. If you have a few minutes, I highly recommend the chapter in Larry Swedroe's newest book, "The Only Guide to Alternative Investments You'll Ever Need" which addresses TIPs.

You can get TIPS in a mutual fund, or an ETF, and have pretty low expenses in either (ie. around 10-20bp). In that context, the fund never matures - but it does have a duration - which means that its value will move up and down with interest rates. If you are buying TIPS to have some lower-volatility investments which have some great low-correlation characteristics and thus help diversify a stock portfolio, funds are just fine. If, however, you know that you need a specific amount of inflation adjusted cash on a specific date - or if you want to engage in some active management of the bond portfolio, you'll want to buy individual bonds.

Thanks for the responses and pointers.

It looks like the issue is quite a bit more involved than I thought...I first need to understand the intricacies of how regular bonds work!

Anoop