Combat Inflation with Index-Linked Bonds

Discussion in 'Economy & Infrastructure' started by pmaitra, Jul 5, 2012.

  1. pmaitra

    pmaitra Moderator Moderator

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    Definition of 'Index-Linked Bond'
    A bond in which payment of income on the principal is related to a specific price index - often the Consumer Price Index. This feature provides protection to investors by shielding them from changes in the underlying index. The bond's cash flows are adjusted to ensure that the holder of the bond receives a known real rate of return.

    In Canada, they also referred to as "real return bonds."

    Investopedia explains 'Index-Linked Bond'
    This type of bond is valuable to investors because the real value of the bond is known from purchase and the risk involved with uncertainty is eliminated. These bonds are also less volatile than nominal bonds and they help investors to maintain their purchasing power. For example, assume that you purchase a regular bond with a nominal return of 4%. If inflation is 3%, you will actually only receive 1% in real terms. On the other hand, if you buy an index-linked bond your cash flow will be adjusted to changes in inflation and you will still receive the full 4% in returns.


    Read more: Index-Linked Bond Definition | Investopedia
     
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  3. sob

    sob Moderator Moderator

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    In India we have Index linked Mutual Funds , but I do not know whether they offer any guaranteed returns.
     
  4. pmaitra

    pmaitra Moderator Moderator

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    I am trying to find a way to save my hard earned money from these facetious and sycophantic banking cartels, and the diabolical laws they get the governments to pass. I have been reading up on it lately. I thought I'd share it with y'all.

    Interesting read: How you could still protect your savings against inflation
     
  5. panduranghari

    panduranghari Senior Member Senior Member

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    The indices like CPI RPI can be doctored.
     

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