grok87 wrote: ↑Sat Mar 24, 2018 7:59 am
Always passive wrote: ↑Sat Mar 24, 2018 2:51 am
smectym wrote: ↑Sat Mar 24, 2018 12:13 am
Absurd. I have plenty of I-bonds and still have worries. One of those worries is that I-bond returns have been ghastly since 666 vs. SPX. Over that period—by now a rather extended period—which investment has done a better job of inflation protection?
Perhaps the next decade will see better results for the magical I-bond. Perhaps. Let’s hope so. Some of those who drank the I-bond/TIPS Kool-Aid don’t have many (any?) decades left to find out.
Smectym
The problem of course is that TIPS are linked to an inflation factor that applies to no one in particular. We all have different life styles, spends differently and live in different places.
But having said that, it is the best solution we have, not great, but i am yet to find a better one to fund retirement. 5 years ago, at 65, I did not commit to a 30 years ladder, just 10. The TIPS real yields bothered me too much to go that long. So I invested the rest in a intermediate term Vanguard corporate bond fund that hopefully provides a better real return (VCIT). Next year, when the fund reaches duration. I will then sell part of it and buy another 5 years worth of ladder. And so on....
Obviously I am taking a bit more risk, but I think not much more.
Looks like you played things well 5 years ago by not buying 30 year tips. 30 year real yields then were very low at less than 0.5%
https://fred.stlouisfed.org/series/DFII30
I would argue that, without knowing what the future would bring, any positive real yield results in TIPS serving their purchase (REAL income preservation in the face of a retiree's worst enemy, inflation). Why? Because their purpose is riskless preservation of spending power going forward, no matter what, plus some, without worry. If your purpose is growth, and you are ok taking risk to try to achieve it, you should put that money in something else . Even nominal Treasuries carry risk of real loss held to maturity.
Many of us bought TIPS last year when yields were hovering around 0.5% (or less). Inflation was ~9%. We had no idea whether it would go down to 3% or go up into the double digits and stay there for a long time. Stocks and bonds were losing and I don't recall any other investment (other than limited purchase of I-bonds in taxable) that was getting more than 1-3% nominal, tops. I don't think it was a bad decision. With money I am willing to put at risk I buy stocks.
I think your 2011 advice was very sound, Grok.
I didn't take it at the time. I was lucky that I benefited from a decade long bull market in stocks, as well as low inflation so my CDs, and even my "high interest" online savings account, also did well, until 2022 when they didn't.
I also never could understand why people would buy EE bonds....tying your money up for that long for a guaranteed NOMINAL yield. Inflation historically has been pretty volatile, though not in recent years until last year. It doesn't take many years of double digit inflation to kill a nest egg .
I would suggest that people stop thinking in nominal terms and only in REAL terms, since those are the only terms that actually matter.