Putting it all in VAIPX?

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HenryPorter
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Putting it all in VAIPX?

Post by HenryPorter » Sat Sep 06, 2014 4:50 pm

How safe is VAIPX in regard to interest rate risks?

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cfs
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Re: Putting it all in VAIPX?

Post by cfs » Sat Sep 06, 2014 4:55 pm

What in the world is this VAIPX thing?

Decoding the secret - Vanguard Inflation-Protected Secs Adm VAIPX

Thanks for reading.
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HenryPorter
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Re: Putting it all in VAIPX?

Post by HenryPorter » Sat Sep 06, 2014 5:15 pm

cfs wrote:What in the world is this VAIPX thing?

Decoding the secret - Vanguard Inflation-Protected Secs Adm VAIPX

Thanks for reading.
I'll take that as a no?

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cfs
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Re: Putting it all in VAIPX?

Post by cfs » Sat Sep 06, 2014 5:18 pm

HenryPorter wrote:
cfs wrote:What in the world is this VAIPX thing?

Decoding the secret - Vanguard Inflation-Protected Secs Adm VAIPX

Thanks for reading.
I'll take that as a no?
Actually, I was decoding the symbol VAIPX, it is a good practice to identify the funds by name (including the symbol after the name is okay) in this way we do not have to do a separate search to find the name of the fund.

Thanks for reading.
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livesoft
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Re: Putting it all in VAIPX?

Post by livesoft » Sat Sep 06, 2014 5:20 pm

It is not safe at all. You can chart how it performed in early summer last year's bond crash when interest rates went up a mere 1%:

Image

It looks like it lost about 10% over the course of 4 months just last year. It has recovered, so it has good 1-year performance numbers off of its low of Sept 2013. Is that what attracted you to it?
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RyeWhiskey
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Re: Putting it all in VAIPX?

Post by RyeWhiskey » Sat Sep 06, 2014 5:21 pm

HenryPorter wrote:How safe is VAIPX in regard to interest rate risks?
Vanguard Inflation-Protected Securities Admiral Shares (VAIPX) has a duration of 7.92 years. This means that for every 1% rise in interest rates it will lose approximately 8% of its NAV (net asset value). So, to answer your question, it is quite sensitive to interest rate movements. :beer
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Phineas J. Whoopee
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Re: Putting it all in VAIPX?

Post by Phineas J. Whoopee » Sat Sep 06, 2014 6:48 pm

Just to add, the TIPS fund is sensitive to changes in real interest rates. It is insensitive to changes in nominal interest rates, which will probably differ.

As already answered, it does have a lot of real interest rate risk.

If you want a TIPS fund with less real interest rate risk at Vanguard, they also offer a short-term TIPS index fund. Over time its returns should be expected to be lower, but it (probably) won't fluctuate as much. The probably is because short-term and intermediate-term real rates can change independently of one another.

PJW

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