If I purchase $1000 worth of iShares® iBonds® Oct 2034 Term TIPS ETF IBIK (NAV $26.27) and I hold the ETF until Oct 2034 and inflation is zero what would I get back if I sold it on Oct 2034 (dividends reinvested)? Trying to understand how this work compare to a 10 year TIP.
Thanks Paul
iShares® iBonds® Oct 2034 Term TIPS ETF IBIK
Re: iShares® iBonds® Oct 2034 Term TIPS ETF IBIK
IBIK only holds two securities, presumably the 30 & 10 year TIPS expiring in 2034. I would just pick whichever looks better to you and buy the bond directly.
That will be fee-free at your broker or Treasury Direct. You will avoid the 0.1% expense ratio and the bonds will be easier to sell early if you need to.
That will be fee-free at your broker or Treasury Direct. You will avoid the 0.1% expense ratio and the bonds will be easier to sell early if you need to.
Re: iShares® iBonds® Oct 2034 Term TIPS ETF IBIK
Not debating buying the TIPS direct but how would they be easier to sell than an etf? It seems to me equally liquid slight edge to etf?degenhead wrote: ↑Tue Oct 01, 2024 12:10 pm IBIK only holds two securities, presumably the 30 & 10 year TIPS expiring in 2034. I would just pick whichever looks better to you and buy the bond directly.
That will be fee-free at your broker or Treasury Direct. You will avoid the 0.1% expense ratio and the bonds will be easier to sell early if you need to.
“Annual income twenty pounds, annual expenditure nineteen nineteen and six , result happiness. |
Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery”
Re: iShares® iBonds® Oct 2034 Term TIPS ETF IBIK
You would probably get back about $25 per share. There isn't supposed to be price appreciation, just income.
Re: iShares® iBonds® Oct 2034 Term TIPS ETF IBIK
The most recent 10 year (2034 expiration) TIPS auction sold $16 billion. $IBIK net asset value is a little over $5 million, with 393 shares daily volume. I'm not sure the practical effects on bid ask spreads, but the bond definitely has more liquidity.
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Square_Foot
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Re: iShares® iBonds® Oct 2034 Term TIPS ETF IBIK
I’ve been thinking about this a lot lately.
These ETFs have low volumes, which could mean unfavorable bid/ask spreads or even a price premium. But there is no “phantom income”, as the ETF pays the phantom income as income. This is a good thing if you have these in a taxable account, as you can use the income to pay the taxes, which you couldn’t do if it were phantom income (you’d have to use money from elsewhere to pay the taxes on the phantom income). You can also re-invest the income back into the ETF.
This only matters if you need to hold this in taxable. But it’s an interesting potential advantage.
These ETFs have low volumes, which could mean unfavorable bid/ask spreads or even a price premium. But there is no “phantom income”, as the ETF pays the phantom income as income. This is a good thing if you have these in a taxable account, as you can use the income to pay the taxes, which you couldn’t do if it were phantom income (you’d have to use money from elsewhere to pay the taxes on the phantom income). You can also re-invest the income back into the ETF.
This only matters if you need to hold this in taxable. But it’s an interesting potential advantage.
Re: iShares® iBonds® Oct 2034 Term TIPS ETF IBIK
The IBIK etf only has about $5.3 million assets under management. That is a tiny AUM in the etf world. With its .10% expense ratio, it is grossing only $53,000 annually. The earlier year etfs have a bit larger AUMs, but very small for a successful etf. I would be concerned that Blackrock would liquidate the etf in the future.
Re: iShares® iBonds® Oct 2034 Term TIPS ETF IBIK
I listened to a podcast on these a while back and agree the phantom income and reinvestment benefits are interesting, but the low volumes are concerning. These iShares funds are somewhat new, and the TIPS versions, are very new, so hopefully they will pick up as I think these could be a realistic alternative for those considering ladders or a mix of TIPS funds, especially for liability matching for shorter term real amounts.Square_Foot wrote: ↑Tue Oct 01, 2024 1:52 pm I’ve been thinking about this a lot lately.
These ETFs have low volumes, which could mean unfavorable bid/ask spreads or even a price premium. But there is no “phantom income”, as the ETF pays the phantom income as income. This is a good thing if you have these in a taxable account, as you can use the income to pay the taxes, which you couldn’t do if it were phantom income (you’d have to use money from elsewhere to pay the taxes on the phantom income). You can also re-invest the income back into the ETF.
This only matters if you need to hold this in taxable. But it’s an interesting potential advantage.
Re: iShares® iBonds® Oct 2034 Term TIPS ETF IBIK
Oh I get the bid ask and thanks for making that distinction. I said liquid I didn’t say you’d like the price haha.
“Annual income twenty pounds, annual expenditure nineteen nineteen and six , result happiness. |
Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery”