Intermediate TIPS fund

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
User avatar
Topic Author
abuss368
Posts: 27850
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Intermediate TIPS fund

Post by abuss368 »

What does everyone think of the Vanguard Intermediate TIPS fund YTD? Big difference from the 9% loss last year. The year to date dividend income is .12 through June 2014.

Thoughts? has anyone taken a position or sold one this year?
John C. Bogle: “Simplicity is the master key to financial success."
User avatar
midareff
Posts: 7711
Joined: Mon Nov 29, 2010 9:43 am
Location: Biscayne Bay, South Florida

Re: Intermediate TIPS fund

Post by midareff »

VIPSX 4.34% YTD, ..... IT IG 6.23% YTD, ...... IT Tax-Ex 5.26 YTD. Nothing exciting there except it's 8 year duration. About 70% of my income is cola'd between SS and pension so AFAIK I don't need the inflation protection, the return has been nothing special and the duration is not to my liking. No Thanks, but other opinions will differ..
User avatar
Topic Author
abuss368
Posts: 27850
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Intermediate TIPS fund

Post by abuss368 »

The duration and low dividend income has always bothered me!
John C. Bogle: “Simplicity is the master key to financial success."
User avatar
tetractys
Posts: 6249
Joined: Sat Mar 17, 2007 3:30 pm
Location: Along the Salish Sea

Re: Intermediate TIPS fund

Post by tetractys »

I think it's about the best intermediate TIPS fund out there. But if course, if apples don't suit you, get something else. -- Tet
User avatar
Doc
Posts: 10607
Joined: Sat Feb 24, 2007 12:10 pm
Location: Two left turns from Larry

Re: Intermediate TIPS fund

Post by Doc »

tetractys wrote:I think it's about the best intermediate TIPS fund out there. But if course, if apples don't suit you, get something else. -- Tet
If I want an intermediate term bond fund I prefer one with intermediate term bonds not one with just an intermediate term average duration.

For example FlexShares iBoxx 5Yr Target Dur TIPS ETF TDTF
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
feh
Posts: 2011
Joined: Sat Dec 15, 2012 10:39 am

Re: Intermediate TIPS fund

Post by feh »

What are folks thoughts on AIANX? It's available in my 401K and I'm thinking about taking a position in it...
pingo
Posts: 2638
Joined: Sat Sep 19, 2009 8:24 pm

Re: Intermediate TIPS fund

Post by pingo »

I'm still invested in my employer-sponsored intermediate TIPS index fund by SSgA (ER 0.06%). I'm still ignoring it, too. It's still less than 4% of our entire portfolio. It's effective duration is 7 years and serves to provide Treasury-issued bonds to the mix I've cobbled together in my employer plan. Combining the Intermediate TIPS fund with a nominal bond fund (mostly corporates and MBS) and a stable value fund, the average duration comes to a hint over 5 years. Those three make up the account minimum that must remain on the employer-side side of the plan, Then, I use my employer's self-directed brokerage feature to access the Schwab Intermediate-Term Treasury ETF (SCHR), since the Schwab Total Bond Fund is 3x more expensive. It's good enough for me, but I'm in the accumulation phase and income from investments is not yet a cause for, well, preoccupation.
Last edited by pingo on Wed Jul 09, 2014 3:06 am, edited 3 times in total.
pingo
Posts: 2638
Joined: Sat Sep 19, 2009 8:24 pm

Re: Intermediate TIPS fund

Post by pingo »

Edited below in red.
feh wrote:What are folks thoughts on AIANX? It's available in my 401K and I'm thinking about taking a position in it...
It might be a wee off-topic, but I would have no problem using AIANX if I simply had to have inflation-protected bonds. I haven't read much on the subject, but I *think* there is practically zero alpha to be had by active management in the inflation-protected bond arena, so costs are even more crucial. So, I could live with ER 0.26% if TIPS were a must-have or if I had to hold bonds in the 401k and AIANX were the most reasonable 401k bond option.
Last edited by pingo on Mon Jul 07, 2014 8:48 am, edited 5 times in total.
Bracket
Posts: 417
Joined: Sun Mar 10, 2013 7:50 pm

Re: Intermediate TIPS fund

Post by Bracket »

I hold 4% (20% of my bonds) in DIPSX, an int term TIPS fund similar to VIPSX that's available In my 401k. The two funds track very closely. Rebalanced into It recently actually. I suppose that's easier to do given that it's such a small part of my portfolio. If I was closer to retirement and/or held more than 20% bonds I might be more concerned, but for now I'm staying the course.
feh
Posts: 2011
Joined: Sat Dec 15, 2012 10:39 am

Re: Intermediate TIPS fund

Post by feh »

pingo wrote:Edited below in red.
feh wrote:What are folks thoughts on AIANX? It's available in my 401K and I'm thinking about taking a position in it...
It might be a wee off-topic, but I would have not problem using AIANX if I just had to have inflation-protected bonds. I haven't read much on the subject, but I *think* there is practically zero alpha to be had by active management in the inflation-protected bond arena, so costs are even more crucial than ever. I could live with ER 0.26% if TIPS were a must-have or if I had to hold bonds in the 401k and AIANX were the only reasonable option when compared to the 401k's other bond options..
I'm considering it because I'm 2 years from retirement (when folks seem to think TIPS start to make sense), and I don't have any TBM funds in my 401K.
User avatar
#Cruncher
Posts: 3977
Joined: Fri May 14, 2010 2:33 am
Location: New York City
Contact:

Re: Intermediate TIPS fund

Post by #Cruncher »

Doc in [url=http://www.bogleheads.org/forum/viewtopic.php?p=2108977#p2108977]this post[/url] wrote:If I want an intermediate term bond fund I prefer one with intermediate term bonds not one with just an intermediate term average duration. For example FlexShares iBoxx 5Yr Target Dur TIPS ETF TDTF
Thanks for mentioning this fund, Doc; I hadn't been aware of it. Its holdings are unlike any other TIPS fund I know of. I wouldn't want to invest in it; but it's interesting.
the Index tab wrote:The Fund reflects the performance of a selection of ... "TIPS," with a target average duration of approximately five years and specific maturity dates of at least three years but not more than 20 years. The Fund seeks to provide investment results that ... correspond generally to ... the iBoxx 5-Year Target Duration TIPS Index.

The iBoxx 5-Year Target Duration TIPS Index measures the performance of Treasury Inflation Protected Securities (TIPS) as determined by Markit iBoxx's proprietary index methodology. (underlines added)
Currently the fund holds 12 TIPS maturing in 3 - 8 years from July 2017 to January 2022 weighted as follows:

Code: Select all

Year  Count    Pct
----  -----   -----
2017     1     2.4   XX 
2018     3    22.1   XXXXXXXXXXXXXXXXXXXXXX 
2019     3    38.0   XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 
2020     2    20.6   XXXXXXXXXXXXXXXXXXXXX 
2021     2    11.1   XXXXXXXXXXX 
2022     1     5.8   XXXXXX 
       ---   -----
        12   100.0
Whatever the proprietary index is, at present it leads the fund to weight its holdings much differently than either equal weights or market weights. The table below lists the 12 bonds the fund holds. One column shows the market weights of all such TIPS outstanding (Mkt Pct) and another the actual weights in the fund from the Holdings tab (Fund Pct):

Code: Select all

                      Mkt      Fund
Matures    Coupon     Pct      Pct    Life     Yield
--------   ------    -----    -----   ----    -------
07/15/17    2.625      5.1      2.4    3.0    (1.150)
01/15/18    1.625      5.8      2.7    3.5    (0.813)
04/15/18    0.125     15.0      7.1    3.8    (0.653)
07/15/18    1.375      5.1     12.2    4.0    (0.807)
01/15/19    2.125      5.2     12.4    4.5    (0.542)
04/15/19    0.125      5.3     12.7    4.8    (0.410)

Code: Select all

07/15/19    1.875      5.4     12.9    5.0    (0.499)
01/15/20    1.375      6.5     15.4    5.5    (0.267)
07/15/20    1.250     10.9      5.2    6.0    (0.236)
01/15/21    1.125     12.2      5.8    6.5    (0.053)
07/15/21    0.625     11.2      5.3    7.0    (0.036)
01/15/22    0.125     12.3      5.8    7.5     0.131
                     -----    -----   ----    -------
Avg wtd by Mkt  Pct  100.0             5.4    (0.359)
Avg wtd by Fund Pct           100.0    5.1    (0.429)
The fund has much higher than market weights of the 5 TIPS maturing July 2018 to January 2020. Counter balancing this, it has much lower weights of both the 3 TIPS maturing earlier and the 4 TIPS maturing later. Overall the fund has both a slightly lower average maturity (5.1 vs 5.4 years) and a slightly lower average yield (-0.429% * vs -0.359%) than it would if it had market weights of the 12 bonds.

* The individual yields are from WSJ TIPS Quotes 7/3/2014. I don't know why the Overview tab of the fund's web page reports a "Weighted Avg Real Yield" of -0.35% as of 7/3/14, some 0.08% points higher than the actual weighted average of -0.43%.
pingo
Posts: 2638
Joined: Sat Sep 19, 2009 8:24 pm

Re: Intermediate TIPS fund

Post by pingo »

[/quote]
feh wrote:What are folks thoughts on AIANX? It's available in my 401K and I'm thinking about taking a position in it...
pingo wrote:It might be a wee off-topic, but I would have no problem using AIANX if I simply had to have inflation-protected bonds. I haven't read much on the subject, but I *think* there is practically zero alpha to be had by active management in the inflation-protected bond arena, so costs are even more crucial. So, I could live with ER 0.26% if TIPS were a must-have or if I had to hold bonds in the 401k and AIANX were the most reasonable 401k bond option.
feh wrote:I'm considering it because I'm 2 years from retirement (when folks seem to think TIPS start to make sense), and I don't have any TBM funds in my 401K.
Those sound like perfectly good reasons to consider AIANX in your 401k. :beer
Last edited by pingo on Wed Jul 09, 2014 3:04 am, edited 2 times in total.
User avatar
Phineas J. Whoopee
Posts: 9675
Joined: Sun Dec 18, 2011 5:18 pm

Re: Intermediate TIPS fund

Post by Phineas J. Whoopee »

Demonstrate for us your time machine and there's a possible answer.

Don't you, as a paid investment adviser, of all people, know past performance does not guarantee future results?

If your clients need inflation protection over the very long term Vanguard's TIPS fund can be a good choice. If they need it to be closer to year-by-year you could consider the short-term TIPS fund for them.

If you, as you've repeatedly asserted, tell them to spend all the dividends you may as well just put them in Treasuries because they'll be spending and not compounding the inflation protection. You know that. You and I have discussed it, publicly and in PMs, again and again.

How TIPS performed in the past eighteen months is irrelevant. How they relate to the other components of a portfolio is of utmost importance. You, of all compensated-for-advice people, must know that, after all your threads, by now.

If they fit the objectives in the context of a portfolio, yes. If not, no. Of course. What's the point of starting thread after thread always asking the same question? What answer are you waiting for you've not received yet?

PJW
pascalwager
Posts: 2327
Joined: Mon Oct 31, 2011 8:36 pm

Re: Intermediate TIPS fund

Post by pascalwager »

You could combine with the ST TIPS Fund to lower the overall weighted duration. Vg uses the ST TIPS Fund in the Target Retirement Income Fund.
VT 60% / VFSUX 20% / TIPS 20%
pingo
Posts: 2638
Joined: Sat Sep 19, 2009 8:24 pm

Re: Intermediate TIPS fund

Post by pingo »

I like abuss368's threads. :happy

I think abuss368 is searching for something elusive, whether it's a satisfying assurance or some knowledge and perspective that is not commonly expressed. You don't always know what it'll be, but when you finally see it, everything falls into place. I, too, try to find answers to vexing questions directly (and indirectly) and all-too-often come up empty...so I persist. Sometimes, luck brings me to find what I didn't expect. Sometimes I find it where I didn't expect it. I often fear that the number of times I have posted on this forum will bring reproach for not knowing answers that others think I should know, but simply don't.

I believe that most things have fallen into place for abuss368 in what is basically a 3-fund portfolio plus REITs.

As I see it, income/dividends are an important part of how Jack Bogle and abuss368 view bonds, but then TIPS funds came into play: for some time, they appeared to offer bond diversification and income diversification which complemented and even improved upon a plain vanilla "total" bond fund (and/or tax-exempt bonds for a taxable account). At the same time, there were a few theoretically risk-reducing advantages to adding TIPS.

The problem now is that the "income diversification" of TIPS funds has become doubtful, if not disappeared, for the foreseeable future. (Yes, there has been decent capital appreciation lately, but we often mention how the best indicator of a bond's future returns are it's yield.) The "bond diversification" story was convenient and nice to have, but does it trump a lack of income when a single "total" bond fund was always a solid choice and it offers a relatively-respectable dividend? When dividends all-but disappear and one considers that the bond diversification wasn't critical, one is left to re-visit the importance (or reality) of any theoretical, risk-reducing advantage they may provide by being inflation-adjusted.

Rather than being the *pop* of a bubble or a devastating loss, the oft-labeled bond crisis may turn out to be a crisis of conviction and the one we suffer because we need more of what we cannot squeeze from an anemic asset class.
Last edited by pingo on Tue Jul 08, 2014 11:47 am, edited 7 times in total.
User avatar
Phineas J. Whoopee
Posts: 9675
Joined: Sun Dec 18, 2011 5:18 pm

Re: Intermediate TIPS fund

Post by Phineas J. Whoopee »

We might have common ground, pingo, except for one thing. Abuss charges clients for investment advice. He presents himself as an expert, tells them to act in what can only be a manner contrary to their interests because it's based on logical fallacies, then asks us for validation. Under those circumstances, in my opinion, he can't have any.

If he was a seeker, that would be fine. He isn't. He charges people money.

PJW
User avatar
Leif
Posts: 3705
Joined: Wed Sep 19, 2007 4:15 pm

Re: Intermediate TIPS fund

Post by Leif »

I got out of this fund and transferred to the ST TIPS find. The IT fund is just too volitale for me. Also, since Vanguard thinks the ST Fund is good enough for their Target funds then it is good enough for me.

Plus, in the longer term I think equities provide decent inflation protection. Not so great in the shorter term, however. I think the ST fund can cover this gap.
Last edited by Leif on Mon Jul 07, 2014 4:24 pm, edited 1 time in total.
User avatar
baw703916
Posts: 6681
Joined: Sun Apr 01, 2007 1:10 pm
Location: Seattle

Re: Intermediate TIPS fund

Post by baw703916 »

I own LTPZ. That actually has a positive real yield (I'm patient, so I don't worry much about what it does in the meantime). And it's indexed...what's with Vanguard anyway? Do they really think they can outperform the TIPS market with active management?
Last edited by baw703916 on Wed Jul 09, 2014 9:48 pm, edited 1 time in total.
Most of my posts assume no behavioral errors.
User avatar
Topic Author
abuss368
Posts: 27850
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Intermediate TIPS fund

Post by abuss368 »

Phineas J. Whoopee wrote:We might have common ground, pingo, except for one thing. Abuss charges clients for investment advice. He presents himself as an expert, tells them to act in what can only be a manner contrary to their interests because it's based on logical fallacies, then asks us for validation. Under those circumstances, in my opinion, he can't have any.

If he was a seeker, that would be fine. He isn't. He charges people money.

PJW
Hilarious! I do? I can not recall noting that I am an "investment advisor"! How does "clients" translate into "investment advisor"?

Priceless!
John C. Bogle: “Simplicity is the master key to financial success."
Rodc
Posts: 13601
Joined: Tue Jun 26, 2007 9:46 am

Re: Intermediate TIPS fund

Post by Rodc »

This may be off topic, but this seems like an area where you could easily just roll your own.

If buying riskier sorts of bonds, a fund is good because it can diversify across issuers, say across corporations.

But for treasuries of any sort why not just put together whatever ladder floats your boat?
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
User avatar
Phineas J. Whoopee
Posts: 9675
Joined: Sun Dec 18, 2011 5:18 pm

Re: Intermediate TIPS fund

Post by Phineas J. Whoopee »

abuss368 wrote: Hilarious! I do? I can not recall noting that I am an "investment advisor"! How does "clients" translate into "investment advisor"?

Priceless!
http://www.bogleheads.org/forum/viewtop ... 1#p1307595
PJW
User avatar
Kevin M
Posts: 15789
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: Intermediate TIPS fund

Post by Kevin M »

I don't pay any attention to YTD performance. I select investments based on expected return and risk, as best I can assess them. I don't like the risk/return prospects of the int-term TIPS fund, and sold my holdings of it and my individual TIPS some time ago. I do continue to like I Bonds though.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
User avatar
Topic Author
abuss368
Posts: 27850
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Intermediate TIPS fund

Post by abuss368 »

pingo wrote:I like abuss368's threads. :happy
Thanks pingo!

That was a nice complement and made my night!

This is a great forum dedicated to the investment advice inspired by Jack Bogle!
John C. Bogle: “Simplicity is the master key to financial success."
Post Reply