But the lack of compounding doesn't cost you. You can reinvest the TIPS coupon payments in more TIPS; this makes the situation more comparable to an I-Bond which does not pay out any cash. (The reinvestment, even in the same TIPS, does have interest-rate risk, but the reinvested amount will be relatively small because a lot of the TIPS coupon will be needed to pay the tax on the TIPS.)TIPS spit out coupon payments, so unless you spend those you have to reinvest them somewhere. I-Bonds do not have coupon payments, so yes, I-Bonds compound, and no, TIPS do not.
Statistics: Posted by grabiner — Wed Feb 19, 2025 9:13 pm