I like to revisit my past financial thinking and decisions a year plus later. I have been buying more TIPS in the bond portion of my asset allocation during the last year and have moved to solely the 10 year duration purchased at auction. I have not recently bought new nominal bonds as the old ones mature and have been letting those proceeds either sit in my settlement fund or buying TIPS.
First, my brokerage settlement accounts are in VMFXX at Vanguard. As of this past Friday the VMFXX 7 day annualized net yield was 4.20% (after the 0.11 expense ratio) which I consider a good yield considering the fund is almost all risk free short term UST notes.
Second, are personal financial issues as my wife has had major health issues recently and I want the financial flexibility to meet potential unexpected uninsured medical expenses and as I am foregoing current part time work to be her full time caregiver I want a stronger cash position in addition to my available emergency reserves and a unused line of credit.
In a followup article on Tipswatch posted today, 6/30/2024, David Enna makes what I think is a good argument, with strong references, that his analysis is that now is a good time to consider TIPS or I Bonds.
It may be best to avoid acting on analysis or forecasts around any elections, better to prepare/hedge for any outcome, inflationary or deflationary. I’ll continue to hold nominal and inflation-indexed bonds no matter what happens in November.
If you look at an analysis Enna did of when nominals have topped TIPS on yield vs inflation, and vice versa, it swings both ways. He has that piece linked in the main TIPS Watch header as TIPS v. Nominals.
As Adam Grossman wisely says: “Aim for the middle of the road”. Or at least avoid the extremes.
I also plan to continue to hold nominal and inflation-indexed US bonds no matter what happens in November. For myself the statement that Mr. Enna makes that resonates the most with me is in his Q&A on TIPS when he writes First off, I want to state loudly that TIPS are for preserving wealth, not building wealth. I expect those of us who are already invested in TIPS (and nominal bonds) will not change anything investment wise after the election. My question to myself in the past was should I as an investor consider TIPS as part of my asset allocation. The continued pace of borrowing by our government encourages me to own TIPS for the buying power protection from unexpected inflation.
Further, I find Adam’s middle of the road position on bonds as well as the percentage of my equities I hold in foreign equities also works well for me.
I am a fan of TIPS for my “don’t mess up” money. I am 48 and I have been buying 15-20 year TIPS in my Rollover IRA so I have reliable funds available to me in the years before I take Social Security. Most of the funds are still in stocks, but I eventually plan to shift more of my funds to TIPS in that account as I get closer to retirement.
I like to revisit my past financial thinking and decisions a year plus later. I have been buying more TIPS in the bond portion of my asset allocation during the last year and have moved to solely the 10 year duration purchased at auction. I have not recently bought new nominal bonds as the old ones mature and have been letting those proceeds either sit in my settlement fund or buying TIPS.
Hey Bill, Why settlement funds vs transferring to a money market fund? My understanding is most settlement funds pay next to nothing in interest.
Good question David, I have two reasons.
First, my brokerage settlement accounts are in VMFXX at Vanguard. As of this past Friday the VMFXX 7 day annualized net yield was 4.20% (after the 0.11 expense ratio) which I consider a good yield considering the fund is almost all risk free short term UST notes.
Second, are personal financial issues as my wife has had major health issues recently and I want the financial flexibility to meet potential unexpected uninsured medical expenses and as I am foregoing current part time work to be her full time caregiver I want a stronger cash position in addition to my available emergency reserves and a unused line of credit.
Oh, so it is in a money market account. Sorry to hear about your wife’s health issues.
In a followup article on Tipswatch posted today, 6/30/2024, David Enna makes what I think is a good argument, with strong references, that his analysis is that now is a good time to consider TIPS or I Bonds.
https://tipswatch.com/2024/06/30/debate-aftermath-barlclays-says-buy-inflation-protection/
It may be best to avoid acting on analysis or forecasts around any elections, better to prepare/hedge for any outcome, inflationary or deflationary. I’ll continue to hold nominal and inflation-indexed bonds no matter what happens in November.
If you look at an analysis Enna did of when nominals have topped TIPS on yield vs inflation, and vice versa, it swings both ways. He has that piece linked in the main TIPS Watch header as TIPS v. Nominals.
As Adam Grossman wisely says: “Aim for the middle of the road”. Or at least avoid the extremes.
I also plan to continue to hold nominal and inflation-indexed US bonds no matter what happens in November. For myself the statement that Mr. Enna makes that resonates the most with me is in his Q&A on TIPS when he writes First off, I want to state loudly that TIPS are for preserving wealth, not building wealth. I expect those of us who are already invested in TIPS (and nominal bonds) will not change anything investment wise after the election. My question to myself in the past was should I as an investor consider TIPS as part of my asset allocation. The continued pace of borrowing by our government encourages me to own TIPS for the buying power protection from unexpected inflation.
Further, I find Adam’s middle of the road position on bonds as well as the percentage of my equities I hold in foreign equities also works well for me.
I am a fan of TIPS for my “don’t mess up” money. I am 48 and I have been buying 15-20 year TIPS in my Rollover IRA so I have reliable funds available to me in the years before I take Social Security. Most of the funds are still in stocks, but I eventually plan to shift more of my funds to TIPS in that account as I get closer to retirement.
David Enna thinks the recent 5y TIPS auction was priced pretty well given the 5y nominal and inflation outlook:
Treasury Inflation-Protected Securities | TIPS: Perfect investment for imperfect times? News, ideas, alerts (tipswatch.com)
New issue TIPS are paying around 2% real yield. My allocation calls for half my bonds to be TIPS and I Bonds (hedging my bets).