What are inflation-indexed bonds?
Currently, there is again talk that the government may introduce inflation-indexed bonds. These are bonds whose returns are linked to an inflation index. A mark-up is added to the inflation rate, and that is the interest rate paid to investors.
Should you invest in them?
These bonds protect investors against inflation. Retirees invest a certain corpus at retirement, and then live off it for the next 20-30 years. When a large portion of the retirement corpus is invested in fixed income (and very little in equities), retirees find themselves waging a lose battle against inflation. By putting some portion