Whip Inflation Now—And For Your Future (NAPSA)—With most experts saying higher inflation is now only a matter of when and notif, savvy investors are turning to a new investment vehicle created to help offset its effects. The new FDIC-insured investmentis called Inflation-Protected Certificates of Deposit, or CDIPs. These pay a stated, fixed rate of Bite Through Inflation with CDIPs Consumer Price Index as a percentage change, on a 12-month basis, from 1953 to 2003. Average annual change was 3.92%. 16.0% interest like a traditional CD, but—and here’s the crucial part— interest is paid on an inflationadjusted amount, not the original deposit amount. At maturity, additional interest is paid equal to the total increase in inflation. Both the final payment andthe periodic interest payments increase as inflation rises. If CDIPs sound similar to the very popular U.S. Treasury Inflation Protected Securities, otherwise known as TIPS, there’s a reason: Theyare. Here’s how they work. Say you invest the minimum $1,000 in a CDIP paying two percent interest. On the first coupon payment date inflation is one percent. The CDIP’s inflation adjusted base increases to $1,010 and the interest paymentis $10.10 ($1,010 times half of two percent). Even if inflation is down when the CDIP matures, the final paymentwill never be less than the amountinvested. “Inflation protected products are being written and talked about by everyone, because many believe inflation will pick up along with the economyin the very near term,” explained Patrick J. Kelly, managing director of LaSalle Broker Dealer Services Division, a leading educator and distributor of taxable fixed-income products and services. “So for those investors who rely on the stability and predictability of fixed-income investing, have an asset alloca- tion strategy and look to hedge against inflation with a real (as opposed to nominal) rate of return on their investments, CDIPs should be an important investment consideration.” His companyis thefirst to offer individual investors an inflationprotected certificate of deposit, where the investor earnsa rate of return equal to the inflation rate plus a stated coupon. This means the total return will always outpace inflation. A valuable feature of CDIPs is the survivor’s option. It allows for the full withdrawal of the principal and interest earned through the redemption date in the event of the death or incompetence of the owner, regardless of current market value. Very few fixedincome investments offer this. “Additionally,” says Kelly, “CDIPs are intended to be offered perhaps as often as weekly on a new issue basis, which has proven to be important to individual investors.” Available in $1,000 denominations, and with maturities of five to 10 years, CDIPs can be purchased through broker-dealers and financial advisors. For more information about LaSalle’s Inflation-Protected Certificates of Deposit or to calculate the rate of return of such an investment, visit LaSalleCDIPs.com.
