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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Oblomov who wrote (86164)	12/1/2000 12:51:01 PM
From: Tommaso	Respond to of 132070

Thanks, I will try to understand it. It seems we just got lucky by putting my wife's pension fund into TIPS just as real interest rates declined. I also found an explanation in connection with ACITX, an American Century inflation-adjusted bond fund (format may be weird): WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND? Inflation-indexed securities offer a return linked to inflation. They are designed to protect investors from a loss of value due to inflation. However, inflation-indexed securities are still subject to the effects of changes in market interest rates caused by factors other than inflation, or so-called real interest rates. Because inflation-indexed securities trade at prevailing real, or after-inflation, interest rates, changes in these rates affect the fund's share value. Generally, when real interest rates rise, the fund's share value will decline. The opposite is true when real interest rates decline. The real interest rate is the current market interest rate minus the market's inflation expectations. As with all funds, your shares of Inflation-Adjusted Treasury may be worth more or less at any given time than the price you paid for them. As a result, it is possible to lose money by investing in the fund.