Now the time to buy Inflation Protected Bond Fund?
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Now the time to buy Inflation Protected Bond Fund?
With the trillions the Fed is injecting into the economy, wondering what this is going to do in the future ( deficit ) & the eventuality of devaluing the dollar....and higher or hyper inflation.
Is now the time to buy Inflation Protected Bond Funds, and in particular which ones to consider for (Vanguard & Schwab)?
Is now the time to buy Inflation Protected Bond Funds, and in particular which ones to consider for (Vanguard & Schwab)?
Re: Now the time to buy Inflation Protected Bond Fund?
I could be wrong, but if inflation is very high, even with inflation protected securities, you will still only have enough to adjust for inflation, as value of money is getting lower....but if I had to count on inflation going so high, I would rather buy gold/silver....
Re: Now the time to buy Inflation Protected Bond Fund?
My fixed income is 100% TIPS, so I could care less if we have inflation, deflation, whatever.... My purchasing power is protected regardless.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
Re: Now the time to buy Inflation Protected Bond Fund?
I am a little confused as what you are saying - could you expound a bit? TIPS adjust both the par, and thus the coupon, for inflation.annu wrote: ↑Thu Mar 26, 2020 8:06 pm I could be wrong, but if inflation is very high, even with inflation protected securities, you will still only have enough to adjust for inflation, as value of money is getting lower....but if I had to count on inflation going so high, I would rather buy gold/silver....
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Re: Now the time to buy Inflation Protected Bond Fund?
If we avoid deflation, we'll be lucky. In the remote chance that we get inflation out of this, it'll be mild (3-4%) at worst and the first overshoot of the Fed's 2% target in well over a decade.PickitPaul wrote: ↑Thu Mar 26, 2020 7:34 pm With the trillions the Fed is injecting into the economy, wondering what this is going to do in the future ( deficit ) & the eventuality of devaluing the dollar....and higher or hyper inflation.
Is now the time to buy Inflation Protected Bond Funds, and in particular which ones to consider for (Vanguard & Schwab)?
So, yeah, buy TIPS if you want, but it won't matter.
A useful razor: anyone asking about speculative strategies on Bogleheads.org has no business using them.
Re: Now the time to buy Inflation Protected Bond Fund?
To answer your question, no. Why? See #5.
Bogleheads Principles
1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course
Bogleheads Principles
1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course
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Re: Now the time to buy Inflation Protected Bond Fund?
Not trying to time market, but would be moving existing bond fund (Total Bond Fund) funds to TIP fund, and possibly gather why this would be a good idea. Also why it is a good idea to stay in Total Bond Fund and say no to TIP.
Re: Now the time to buy Inflation Protected Bond Fund?
100% individual TIPS, bought either at auction or in the secondary market. There is absolutely no reason to pay a fund's expense ratio when buying individual TIPS introduces no fees. My ten year ladder will be complete this summer, and I'll just be rolling rungs in the January auctions every year from now on.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
Re: Now the time to buy Inflation Protected Bond Fund?
The main reason folks argue in favor of Total Bond is that historically you would have a higher yield. That comes with a cost (increased risk from the non-treasury holdings). We've seen some of that risk become real in the past several weeks, as corporate bonds have their ratings dropped.PickitPaul wrote: ↑Thu Mar 26, 2020 8:41 pm Not trying to time market, but would be moving existing bond fund (Total Bond Fund) funds to TIP fund, and possibly gather why this would be a good idea. Also why it is a good idea to stay in Total Bond Fund and say no to TIP.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
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Re: Now the time to buy Inflation Protected Bond Fund?
I've been waiting for a decade for QE-induced inflation to arrive.
Why is this round of QE different?
Why is this round of QE different?
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Re: Now the time to buy Inflation Protected Bond Fund?
I've split my bond allocation up between inflation protected bonds, int. treasuries, and total bond.PickitPaul wrote: ↑Thu Mar 26, 2020 7:34 pm With the trillions the Fed is injecting into the economy, wondering what this is going to do in the future ( deficit ) & the eventuality of devaluing the dollar....and higher or hyper inflation.
Is now the time to buy Inflation Protected Bond Funds, and in particular which ones to consider for (Vanguard & Schwab)?
Doesn't hurt to add some TIPS or Gold just in case....
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Re: Now the time to buy Inflation Protected Bond Fund?
Tag. Similar questions to OP.
Maybe some details on 'how' your doing this will help. Cheers
Maybe some details on 'how' your doing this will help. Cheers
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- William Million
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Re: Now the time to buy Inflation Protected Bond Fund?
I only buy TIPS at 2% real. At 3%, I back up the truck. I sell when they fall below 1%. Works but takes patience.
Re: Now the time to buy Inflation Protected Bond Fund?
Why would you rather have gold/silver?annu wrote: ↑Thu Mar 26, 2020 8:06 pm I could be wrong, but if inflation is very high, even with inflation protected securities, you will still only have enough to adjust for inflation, as value of money is getting lower....but if I had to count on inflation going so high, I would rather buy gold/silver....
Short term, gold has not consistently matched inflation. Over 100+ year spans it has.
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
Re: Now the time to buy Inflation Protected Bond Fund?
When was the last time you got them at 2% real?William Million wrote: ↑Thu Mar 26, 2020 11:17 pm I only buy TIPS at 2% real. At 3%, I back up the truck. I sell when they fall below 1%. Works but takes patience.
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
Re: Now the time to buy Inflation Protected Bond Fund?
It might be a good time to buy them since inflation expectations are low. Buy the bonds and hold them to maturity if you can to avoid loss in principal. If not practical, I would buy a short term fund to minimize that risk. Vanguard is fine. Personally, I own no TIPS, although I have seriously considered acquiring them in the past.PickitPaul wrote: ↑Thu Mar 26, 2020 7:34 pm With the trillions the Fed is injecting into the economy, wondering what this is going to do in the future ( deficit ) & the eventuality of devaluing the dollar....and higher or hyper inflation.
Is now the time to buy Inflation Protected Bond Funds, and in particular which ones to consider for (Vanguard & Schwab)?
Re: Now the time to buy Inflation Protected Bond Fund?
Why would you buy inflation protection when we are having deflation?
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Re: Now the time to buy Inflation Protected Bond Fund?
This would be market timing. Purchasing any investment should be a strategic decision, and not based upon your opinion regarding what might happen in the economy in the near term.PickitPaul wrote: ↑Thu Mar 26, 2020 7:34 pm With the trillions the Fed is injecting into the economy, wondering what this is going to do in the future ( deficit ) & the eventuality of devaluing the dollar....and higher or hyper inflation.
Is now the time to buy Inflation Protected Bond Funds, and in particular which ones to consider for (Vanguard & Schwab)?
Best regards, -Op |
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"In the middle of difficulty lies opportunity." Einstein
Re: Now the time to buy Inflation Protected Bond Fund?
Sometimes the yield is better / the insurance is cheaper when people don't think they need it.
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
Re: Now the time to buy Inflation Protected Bond Fund?
Last I checked, Vanguard's target-date funds add TIPS right around the time equity allocations glide low. So I guess their idea is that stocks have inflation-protection built in and they think TIPS are a good idea for inflation-protection when equity allocation is low.PickitPaul wrote: ↑Thu Mar 26, 2020 8:41 pm Not trying to time market, but would be moving existing bond fund (Total Bond Fund) funds to TIP fund, and possibly gather why this would be a good idea. Also why it is a good idea to stay in Total Bond Fund and say no to TIP.
My inflation rate is well above the Fed target already, because the stuff I pay for goes up faster than the CPI. I'm talking about rent, health care/insurance, and eating out. I don't think we've ever, or will ever, see deflation in those items. I hardly buy any manufactured goods like electronics. If I ever see deflation in my basket of purchases, I think that'll be lucky.
With that in mind, I wish they'd invent a new security, ICEAI TIPS (tipping my hat to the famous quote, "I can't eat an iPad").
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- William Million
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Re: Now the time to buy Inflation Protected Bond Fund?
2008. Actually, I bought at well north of 3%.watchnerd wrote: ↑Fri Mar 27, 2020 12:23 amWhen was the last time you got them at 2% real?William Million wrote: ↑Thu Mar 26, 2020 11:17 pm I only buy TIPS at 2% real. At 3%, I back up the truck. I sell when they fall below 1%. Works but takes patience.
Re: Now the time to buy Inflation Protected Bond Fund?
Right.William Million wrote: ↑Fri Mar 27, 2020 11:10 am2008. Actually, I bought at well north of 3%.watchnerd wrote: ↑Fri Mar 27, 2020 12:23 amWhen was the last time you got them at 2% real?William Million wrote: ↑Thu Mar 26, 2020 11:17 pm I only buy TIPS at 2% real. At 3%, I back up the truck. I sell when they fall below 1%. Works but takes patience.
That's a long wait.
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
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Re: Now the time to buy Inflation Protected Bond Fund?
What do you hope to gain?
I am not against inflation-protected securities. As I've disclosed before, 40% of my portfolio is in inflation-indexed fixed income, because of my evaluation of my own situation.
What news story did you read that none of the institutional investors read? The stories are written to be machine-readable. The computers follow their pre-written instructions before individual people can even open the window to read the story.
Why now, in particular. We can't go back and buy before. Why not later? I'm asking for reasoning, not feelings.
Each market day an invested person faces the choice of selling for cash, then going back in, or staying at their approximate allocation. I choose to stay in with my inflation-protected approximately 40%.
PJW
I am not against inflation-protected securities. As I've disclosed before, 40% of my portfolio is in inflation-indexed fixed income, because of my evaluation of my own situation.
What news story did you read that none of the institutional investors read? The stories are written to be machine-readable. The computers follow their pre-written instructions before individual people can even open the window to read the story.
Why now, in particular. We can't go back and buy before. Why not later? I'm asking for reasoning, not feelings.
Each market day an invested person faces the choice of selling for cash, then going back in, or staying at their approximate allocation. I choose to stay in with my inflation-protected approximately 40%.
PJW
Re: Now the time to buy Inflation Protected Bond Fund?
I may increase my stake in tips. I actually sold some to buy back into stocks last week, but I'll probably swap some regular bonds for TIPS. Nothing radical.
My thought process is with treasuries yields so low, I almost question their risk return relationship long term. With all the liquidity and stimulus, increasing debt, and endless entitlement Program shortfalls it is hard to see how long term we get out of it without inflation. And if it comes back, with massive amounts of national debt there will be hesitation to raise interest rates because debt service would become too burdensome.
I don't necessarily predict this scenario, but is a real risk IMO, and thus a bigger position in TIPS may be justified. We will see what I actually do. I often have these grand ideas about this and that, but if I act on them at all, it is in a very incremental way.
My thought process is with treasuries yields so low, I almost question their risk return relationship long term. With all the liquidity and stimulus, increasing debt, and endless entitlement Program shortfalls it is hard to see how long term we get out of it without inflation. And if it comes back, with massive amounts of national debt there will be hesitation to raise interest rates because debt service would become too burdensome.
I don't necessarily predict this scenario, but is a real risk IMO, and thus a bigger position in TIPS may be justified. We will see what I actually do. I often have these grand ideas about this and that, but if I act on them at all, it is in a very incremental way.
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Re: Now the time to buy Inflation Protected Bond Fund?
I think this is perhaps and overstatement. Your purchasing power protection depends on what you are spending your money on as not all things inflate at the same rate. New car, education, health care, technology, housing, food, etc.
The CPI or whatever the TIPS are based on may not be representative of what you need to spend money on.
Re: Now the time to buy Inflation Protected Bond Fund?
Yeah, I know. Somebody chimes into every thread like this pointing that out. It is largely irrelevant. I'm guessing it's also about time for somebody to suggest that the US Treasury may default, so TIPS aren't "safe."RonSwanson wrote: ↑Fri Mar 27, 2020 10:01 pmI think this is perhaps and overstatement. Your purchasing power protection depends on what you are spending your money on as not all things inflate at the same rate. New car, education, health care, technology, housing, food, etc.
The CPI or whatever the TIPS are based on may not be representative of what you need to spend money on.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
Re: Now the time to buy Inflation Protected Bond Fund?
You are buying specific TIPS bond and not a TIPS fund? Where you do buy them at (401k vs taxable)? And how do you control their duration?William Million wrote: ↑Thu Mar 26, 2020 11:17 pm I only buy TIPS at 2% real. At 3%, I back up the truck. I sell when they fall below 1%. Works but takes patience.
Re: Now the time to buy Inflation Protected Bond Fund?
I've got 70% short term TIPS for my fixed income. I view them as a very safe, almost (but not quite) cash-like investment where I keep my safe money. However, they weren't unaffected by the downturn, and through it all, if you tune into it, all you hear about is talk of deflation and how you will not be protected (at least not in a fund which do not hold to maturity).
We should have a little bit of each thing, but then we're faced with needing to have so much of something for it to matter. Then you get the mantra about how TIPS only protect themselves from unexpected inflation, i.e. don't provide much of an upside that actually helps the overall portfolio. One of the weaknesses of TIPS is how small of a fraction of the overall bond market they make up.
Honestly you can't win, and the grass is always greener. I don't think those of us that own TIPS think we're particularly smarter than anybody else. We're just more risk averse, and probably we will be less compensated. I'm hoping/praying stocks compensate me for risk.
We should have a little bit of each thing, but then we're faced with needing to have so much of something for it to matter. Then you get the mantra about how TIPS only protect themselves from unexpected inflation, i.e. don't provide much of an upside that actually helps the overall portfolio. One of the weaknesses of TIPS is how small of a fraction of the overall bond market they make up.
Honestly you can't win, and the grass is always greener. I don't think those of us that own TIPS think we're particularly smarter than anybody else. We're just more risk averse, and probably we will be less compensated. I'm hoping/praying stocks compensate me for risk.
Re: Now the time to buy Inflation Protected Bond Fund?
Your point about whether or not one's individual purchasing power tracks closely enough to CPI for the CPI to be an acceptable surrogate for one's individual circumstances is a valid question, that only you as an individual can answer. Many have spoken to this (Dirk Cotton, Wade Pfau, Bill Bernstein, Zvi Bodie, others), and their general answer seems to be: we acknowledge the concern, but ask what is the better alternative?FIREchief wrote: ↑Fri Mar 27, 2020 11:17 pmYeah, I know. Somebody chimes into every thread like this pointing that out. It is largely irrelevant. I'm guessing it's also about time for somebody to suggest that the US Treasury may default, so TIPS aren't "safe."RonSwanson wrote: ↑Fri Mar 27, 2020 10:01 pmI think this is perhaps and overstatement. Your purchasing power protection depends on what you are spending your money on as not all things inflate at the same rate. New car, education, health care, technology, housing, food, etc.
The CPI or whatever the TIPS are based on may not be representative of what you need to spend money on.
For our family, we have concluded that CPI is close enough to our personal metric, and clearly better than any other. So for us, TIPS provide us two benefits: one is an inflation tracking investment, the other is a small positive (until recently) return above and beyond inflation tracking. No other investment other than I-bonds does so explicitly. And for us, that is reassuring.
Re: Now the time to buy Inflation Protected Bond Fund?
Can't buy insurance on a burning house! Think "value investing" for bonds.