TIPS

Treasury Inflation-Protected Securities. US Treasury bonds whose principal adjusts with the CPI — when inflation rises, your principal grows; when it falls, principal shrinks (but is floored at the original amount at maturity). Coupons are paid as a fixed percentage of the inflation-adjusted principal, so coupon dollars also rise with inflation.

Effective inflation hedge — but you give up some yield (real yield ≈ nominal yield minus expected inflation). Best held in tax-advantaged accounts because the inflation adjustment is taxed annually as income (the "phantom income" problem).