What actually happened in 2022
In 2022, inflation ran roughly 6.5% and broad TIPS index funds returned about minus 12% nominal — a real loss on the order of 18% in the one year their holders most expected protection. Meanwhile, every individual TIPS inside those funds kept every promise it ever made: its principal kept adjusting up with CPI, and anyone holding an individual bond to maturity was made entirely whole on schedule.
Both things are true at once because a fund and a bond are different instruments. The bonds inside the fund fell in market price when real yields jumped from roughly −1% to +1.5%; a bondholder with a maturity date could ignore that mark-to-market round trip, but a fund has no maturity date. It perpetually rolls its holdings to maintain a target duration, so there is no future date on which its price is guaranteed to recover. The 2022 loss wasn't a malfunction. It was duration, working as designed, in a product people had mistaken for a savings account with an inflation match.
The one-sentence version
An individual TIPS held to maturity locks a known real return; a TIPS fund gives you inflation-indexed exposure with unhedged interest-rate risk, forever. Neither is wrong. They answer different questions.
When a fund is the right answer
Funds are the better tool while you are accumulating: they take new money in any amount, reinvest coupons automatically, never mature into cash you must redeploy, and avoid every mechanical chore of ladder maintenance. If your horizon is long, flexible, and doesn't depend on specific dollars arriving in specific years, a low-cost TIPS fund is a perfectly good way to hold the asset class — provided you go in knowing its price can and will swing with real yields, 2022-style.
When only a ladder does the job
The moment your question changes from "I want inflation-protected exposure" to "I need $X of real income in 2031, 2032, 2033…" — a retirement income floor, a bridge to Social Security, known future liabilities — the fund's missing maturity date becomes disqualifying. A ladder of individual TIPS, each rung held to maturity, is the only version of this asset that converts today's real yields into a contractual schedule of inflation-adjusted payments. Rate moves after purchase become irrelevant: the 2022 scenario simply does not apply to a rung you hold to its maturity date.
The trade-offs run the other way too: ladders require buying specific bonds (see the gap years for the one structural wrinkle), produce phantom taxable income outside tax-advantaged accounts, and need occasional attention as rungs mature. None of this is hard, but it is homework a fund does for you.
A decision rule that holds up
Accumulating with a flexible horizon: a fund is fine, own the volatility knowingly. Funding specific spending years in decumulation: build the ladder. Doing both — many retirees hold a ladder for the income floor and a fund for the surplus — is not a compromise; it is using each instrument for the job it actually does.
Ready to see what a ladder costs at today's real yields — the highest since 2008? The free calculator prices your exact spending years, coupon math and gap years included.