TIPS - Going Down with the Ship?

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thx1138
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Re: TIPS - Going Down with the Ship?

Post by thx1138 »

abuss368 wrote:Who would want the complexity compared to a simple bond fund?
Who would want the complexity of "three fund + REIT" instead of a single target date fund :happy

Bond ladders and bond funds are similar but not identical. Much like "three fund + REIT" is similar but not identical to a target date fund.

Bond ladders are slightly cheaper than bond funds, much like "three fund + REIT" is often slightly cheaper than a target date fund.
Leesbro63
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Re: TIPS - Going Down with the Ship?

Post by Leesbro63 »

One big factor has to do with whether you are a truly long term investor or not. For the truly long term investor, bond funds are little different than bond ladders. This may not be correct with TIPS, however, as I admit I haven't totally gotten to understand the nuances of TIPS. The nice thing about bond funds is that you can fool yourself into ignoring the price fluctuations of the individual bonds. And can ignore the fact that purchasing power of both the maturing bonds and the coupon payments also fluctuates. But it's just a head game.
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Re: TIPS - Going Down with the Ship?

Post by Tom_T »

thx1138 wrote:
abuss368 wrote:Who would want the complexity compared to a simple bond fund?
Who would want the complexity of "three fund + REIT" instead of a single target date fund :happy
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cflannagan
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Re: TIPS - Going Down with the Ship?

Post by cflannagan »

Honesty, all those "additional diversification benefit", "simple and effective", "thank you Jack Bogle" threads/posts used repeatedly is becoming a bit too "preachery" for my liking.

Yes, thanks Jack Bogle for ALL his offerings.. there are enough offerings by Vanguard for any of us to be able to reasonably build our asset allocation, and one of those options include Vanguard TIPS fund.

People have different wants/needs for their asset allocations.. one can't really force all others to follow one fund or ignore the other fund.
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Bustoff
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Re: TIPS - Going Down with the Ship?

Post by Bustoff »

ricb wrote:Please refer to: “Don’t Ditch Those Bonds” by Jane Bryant Quinn in the September, 2013 issue of AARP magazine.
http://pubs.aarp.org/aarpbulletin/201309?pg=23#pg22
Just read this article. Quinn claims that bond funds will benefit from rising rates
if you're:
[1]reinvesting dividends,
[2]making only modest withdrawals,
[3]planning to hold on to the funds for 20 years or more.

What are "modest" withdrawals ?
Why the need to hold for "20 years or more" ?
Quinn offers no explanations or why the need for a 20 year holding period despite the various available durations of bond funds.
Carpe
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Re: TIPS - Going Down with the Ship?

Post by Carpe »

abuss368 wrote:Who would want the complexity compared to a simple bond fund?
I believe you are referring to administrative complexity. There are also other forms of complexity, such as the complexity of the instrument being used, or the complexity (and uncertainty) of outcome. So, in the case of inflation protection, having a simple bond fund may allow you to tick one of these boxes, but that's about it. For inflation protection, some might argue that it is more important to establish a less complicated (i.e. more certain) outcome. There are compromises everywhere.

It also seems that you have also rejected the notion of using Ibonds. They don't lose value, and don't (have to) present phantom income in taxable accounts. I believe these are amongst the concerns that you have for TIPS (funds). Ibonds extend tax advantaged space (you seem limited to taxable investing) as well as more of the boxes to be ticked (easier to understand, known outcome). For many, and particularly those that see the benefits of executing a long-term investment plan involving administration effort, they offer a very simple and straight forward solution that is there for the taking.

Otherwise, happy that you have found a good fit with your three fund, only investing in funds strategy.
Carpe: pick, pluck, pluck off, gather
billyt
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Re: TIPS - Going Down with the Ship?

Post by billyt »

Hmmm... Not too long ago the Vanguard TIPS fund had a negative real yield. Now it has a positive real yield. Your returns have gone up significantly. Seems to me the TIPS ship is going up, not down.
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Re: TIPS - Going Down with the Ship?

Post by abuss368 »

billyt wrote:Hmmm... Not too long ago the Vanguard TIPS fund had a negative real yield. Now it has a positive real yield. Your returns have gone up significantly. Seems to me the TIPS ship is going up, not down.
I did notice that.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: TIPS - Going Down with the Ship?

Post by abuss368 »

I just reviewed the YTD, 1 year, 3 year, 5 year, 10 year, and inception as of today on Vanguard's website. The Total Bond Fund is down a lot less year to date and is ahead in the YTD, 1 Year, 5 year, with the TIPS fund ahead by a very small amount for the 3 year. What I found interesting is the two funds are practically the same over 10 years. I realize the differences in duration.

The Three Fund Portfolio with Staying the course works!

Keep investing simple.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: TIPS - Going Down with the Ship?

Post by abuss368 »

This fund is now down 7.36% for the YTD according to Vanguard's website. What could happen on Thursday?
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Re: TIPS - Going Down with the Ship?

Post by abuss368 »

Would anybody know if the subject of TIPS was discussed at the Bogleheads event? Perhaps Jack Bogle had some thoughts?
John C. Bogle: “Simplicity is the master key to financial success."
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nedsaid
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Re: TIPS - Going Down with the Ship?

Post by nedsaid »

TIPS are down about 7% year to date. I notice that other bond funds are down between 1 and 2%. I have been buying TIPS lately, both in my IRA and at my workplace savings plan.

It is hard for me to know exactly if TIPS are a "good deal" here. I have been reading that their real yield has gone positive again. They certainly are a better value than they were a year ago. Since they are the asset class that has gone down the most this year, I have been directing funds that way. If you don't know what to do with available funds for investing it seems to me that directing those funds to recently underperforming asset classes is a good strategy. I am doing the reverse of performance chasing.

We are learning that TIPS can be pretty volatile. So I still have the bulk of my bond investments in the intermediate term investment grade bonds. Vanguard Total Bond Market Index seems a great core bond investment.
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momar
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Re: TIPS - Going Down with the Ship?

Post by momar »

I didn't read the whole thread. But I don't like TIPS because I feel like the inflation component encourages speculation. This, in fact, seems to be the defining feature of TIPS.
"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep
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