FYI: Bond funds and individual bonds have very different performance characteristics, but nowhere is this more apparent than it is in a comparison between individual Treasury Inflation Protected Securities (TIPS) and TIPS bond funds.
Individual TIPS can provide inflation protection if held unto maturity, but TIPS funds are affected by other factors, the most important of which is interest-rate risk. But this isn’t the only way in which TIPS funds fall short compared to individual TIPS. There’s another, more insidious, factor that comes into play, and this became apparent during the second half of 2014: the impact of falling inflation expectations.
Regards,
Ted
http://bonds.about.com/od/TIPS/fl/How-Falling-Inflation-Hurts-Your-TIPS-Bond-Fund.htm
