This paper specifically addresses unexpected inflation. I've had trouble quantifying just how often that occurs, and therefore what degree of protection is required for the unexpected event instead of general ongoing high inflation.garlandwhizzer wrote: ↑Tue Nov 12, 2019 2:10 pm CULater wrote in the original post:
IMO this is an excellent piece that explains the uses of TIPs, Commodities, Gold, etc., for inflation protection. Each has its own niche of effectiveness but none is perfect in all inflationary situations. A good read IMO if you want to understand your choices for inflation protection and what might work best in your own situation.You can read more here:
The simplest definition of unexpected would be anything more that what exists today (ie, steady state). By that definition, I don't think we've ever had a continuous period longer than 5 years (1966-70). Adding even a small margin to that definition shrinks the risk pretty quickly. I've tried Linear Moving Averages up to five years, but found again that the simplest case works best also. With those results, a 5-year rolling TIPS ladder or a short-term fund would pretty much cover that particular risk. Based on that, I'm using three years of expected withdrawals to define my TIPS allocation.
Does anyone have a better idea of just how much unexpected inflation protection has been necessary in the past -- and may be needed in the future?
On a parallel note, just how much deflation protection is necessary? That risk also seems hard to quantify.