TIPS

hugh2018

I said nothing about drawing income from bonds and that isn't the way my plan works even by the wildest interpretation. The guaranteed floor of social security and annuity isn't lying about being guaranteed. It's guaranteed. The TIPS ETF ladder is also guaranteed (and inflation adjusted). The remainder of my income, on which I don't have to rely to keep the lights on, has to come from whatever asset or combination of assets are holding up well at the time of withdrawal, just like any other person, including you, who has money invested in the market on any level. There are several issues with your comments. First, VTIP and the TIPS ETF ladder are inflation protected by definition, so that hedge is built in to my plan and your analysis of my plan's inflation resilience is way off the mark. VT also combines with those two elements to create a comprehensive inflation defense. The VTIP and TIPS provide a direct, mathematically guaranteed adjustment to unexpected short-term spikes in consumer prices, and the global equity exposure of VT acts as a long-term growth engine capable of outpacing persistent inflation over decades. As you know, I'm weighing the impact of reducing the inflation protection a bit by moving VTIP to a MYGA, but the risk is muted, as the MYGA returns are going to beat most inflation regimes anyway. Second, diversity is not an issue in a growth engine that has VT as its foundation. It literally owns a market-cap-weighted slice of over 10,000 corporate entities operating across both developed and emerging markets in the US and abroad. It's an absolute model of broad diversity. Your portfolio, in contrast, suffers from severe sector and structural concentration, leaving it highly vulnerable to specific economic shocks. By crowding capital into niche closed-end funds, actively managed credit instruments, and derivative-heavy overlay strategies, this mix completely lacks the true global diversification found in a total market index. Third, you're displaying a fundamental misunderstanding of total return versus yield extraction. High-yield dividend funds and derivative-based income strategies do not generate wealth out of thin air; rather, they strip equity value from the underlying assets to distribute it as cash, or they take on highly concentrated credit and structural risks. Over long investment horizons, this creates a profound drag on total return compared to a total market index fund.

Exciting-Patient2365

Honestly if you’re talking multi decade, the boring answer is usually the right one. Global diversification, not just US: total world index, some small cap value, some non US, some real assets like REITs or commodities, plus cash/TIPS for dry powder. If you’re worried about a crash, instead of trying to time it, just lower your equity % and maybe tilt more to value and international which are way less AI frothy. Gold can be a small slice if it helps you sleep, but I’d treat it as insurance, not The Plan. The dot com chart is scary but remember a lot of those names literally died. Now the index is way more profitable and diversified. Adjust risk, do a written asset allocation you can actually stick to, then stop watching CNBC.

VanDenH

**Treasury Inflation-Protected Securities (TIPS)**

Ok_Review_3792

BRB buying TIPS

Fast-Reply6409

While we're crying in the casino, TIPS bros are feasting.

VeryStableGenius

TIPS are paying almost 2.8% over inflation. (yeah, I know, taxed on the whole amount)

ekemp

Qualified yes... a certain amount of inflation is "priced in" to the TIPS. If actual inflation is higher than expected, you win. If it's less than expected, the T-bills are better.

Suspicious-Fish7281

I went with total world market funds. I seek to own all the stocks and not just the 500 biggest US stocks provided by the S&P500. Most of my retirement money is with Fidelity, so specifically FZROX (US) and FZILX (International) in my tax advantaged accounts and FSKAX and FTIHX in my taxable brokerage. Bonds. I hold a bond fund FXNAX now because I am about 3 to 7 years out from retirement and want additional stability. I also want a different asset bucket to sell from in my withdrawal phase in retirement. Bonds historically have a better return than cash and better stability than stocks. Bonds also are mostly negatively correlated with the market. When the market goes down bonds tend to go up (we didn't see this in 08'). That said I am still only 20% bonds and likely won't increase that much. If you are further away from retirement than me then run less to no bonds. If you are risk adverse than run some bonds. I believe that is about all the diversity that you need. Small 1 or 2% hedge with precious metals is fine I guess. Reits are probably okay if you rent but if you own your home you probably already are overexposed to real estate. TIPS have their place as an additional safe income replacement for early retirement. Want to take 1 or 2% of your net worth a pick a single stock or 2 go ahead, have some fun. Don't over complicate it. Professional teams paid millions fail to beat the market by picking. I am not better than them and neither are you. Buy low expense total market funds consistently from a young age and in tax advantaged accounts when possible. Add bonds as your age and risk tolerance changes. It will be boring and slow but you will get there. See r/personalfinance and r/Bogleheads for more information.

Yottahz

TIPS, or just the tip.

Yottahz

Honestly I was eying the 30 year TIPS at near 3% real the other week.

Huge-Description3228

15 put spreads on QQQ dated for Jun27 15 put spreads on NVDA dated for March 27 10 naked $250 strike puts on Goog dated March 27 The rest is in TIPS and SONIA benchmarked short duration MM funds. In a market sell-off lead recession, cash is king.

skilliard7

Who said you need to sit fully in cash? There's plenty of undervalued opportunities right now. REITs, long term government TIPS bonds, some value plays, etc. You aren't "Sitting on the sidelines" just because you choose to omit GOOG from your portfolio. People here act like I "lost" because I didn't hold onto Google the past year while it went up 2x, when I made 10x on SK Hynix/Samsung/WDC/Sandisk...

Accidental-Genius

Everything else *that survives* Hyperinflation will kill a lot of companies. It won’t kill Google. There’s an argument to be made that parking cash in Google is a safer place than parking it in TIPS.

Nice-Truck8806

i don't see how this is unique to TIPS... plenty of bonds trade above par. the coupon plus the premium/discount relative to par is what creates the overall yield. and in some ways buying bonds above par with high coupons makes taxes easier.

HistoricalDetail1731

This 5 year TIPS purchase was my one and only Treasury purchase. I understood the basic concept behind TIPS, but did not appreciate that when I wanted to buy TIPS for 100k my bank account would be debited 102k. I have not seen material that clearly explains this pricing / buying issue.

Here4Snow

I'm still confused. Did you not know how TIPS work, especially when compared to regular Treasury Bills, notes and bonds? You didn't really lose anything.  I really like investopedia articles, maybe this will help you: https://www.investopedia.com/terms/t/tips.asp

HistoricalDetail1731

Yes, Treasury Direct has disbursed approximately $2,100 per year so I’m definitely above water on this TIPS buy. That said, I was still disappointed that I “lost” $2k at the very outset. It seems that an individual takes on some risk buying Treasury’s in a noncompetitive auction given that you may need to pay a premium. If I buy something valued at 100k, I don’t want to pay 102k. I don’t think your link addressed the premium purchase price issue.

ClearValue1994

You haven’t done anything wrong, you just paid a premium at auction which is pretty common in 2022 when inflation protection was in high demand. The $2k loss at the start is just the market pricing in future inflation adjustments that were already expected. The way to think about TIPS is total return not face value, so the coupon payments plus the inflation adjustment to principal is your real return. If inflation came in higher than what was priced in when you bought you’ve actually done fine. The mistake most retail investors make with TIPS is buying them when inflation expectations are already elevated, which is exactly when everyone wants them.”

TrixoftheTrade

That’s what TIPS are for

Huge-Description3228

I'm taking profits and buying Gold, Silver, TIPS and lots and lots of dividends.

Timbo1994

If you are going to buy bonds, do it as part of a strategy based on how short-term and how essential your spending is that you are trying to cover. I have some long-dated inflation-linked bonds (TIPS if in the US) to cover essential bills in the 2040s. If you are investing for the short-term then even more reason to buy bonds. Remember with standard bonds that inflation risk is real, and over long horizons it may even exceed equity risk. I can stomach equities for vacation money - they still have the higher expected return (though my view is that the equity risk premium is much narrower than it has been).

Plane-Salamander2580

Allocating part of your portfolio to bond ETFs, to dividend funds like SCHD/DGRO, to BRK.B are all viable solutions to diversify. Also, if you consider yourself an experienced and educated investor, consider global value ETFs, Singapore blue chip stocks (if available, many high dividend yielding), REITS and TIPS.

PartsSprout

Ok that makes a lot more sense and that is the way to do it IMO. BND, TIPS, and similar long and intermediate bond funds are just abysmal for portfolios over the last decade.

VeryStableGenius

I'm not sure if that, erm, metaphor works the way you imagine. Anyway, TIPS paying inflation plus 2.7% if you wanna be a benchwarmer.

VeryStableGenius

TIPS inside a retirement fund are a pretty safe haven ("winning deal"). Even outside a tax sheltered investment, inflation would have to be much higher to make them a losing deal.

creemeeseason

Utilities are traditionally viewed as bond proxies. You get a decent dividend and a steady stock. The 10 year yield going up is a direct competitor to those stocks. Why take market risk for a 3-4% divvy when you can get 4.5% from the government, or 3-4% in TIPS? Also, market is pretty risk on right now which is bad for utility stocks that are considered low risk. Just a hunch.

ATPsynthase12

You don’t need a financial advisor at all. They are just middle men who harvest 1-3% of your portfolio per year and often either lose you money (via outright losses or sub par performance) or go full big brain moves to beat the S&P 500 and again end up losing your money. Or, they intentionally do stupid things to make more money off of you such as putting money on a corporate bond fund. Pull your money out and transfer it to a fidelity brokerage SPAXX account. Once the cash has settled invest it in the following; 50% VTI (vanguard total stock market index), 30% VXUS (vanguard total non US stock market), and 20% in BND. If you are not retiring soon or want more growth, do 70% VTI, 30% VXUS. Although, at your age, there is a strong argument to include bonds or TIPS to ensure you have less volatility and cash on hand if needed. That’s it. Contribute monthly, reinvest the dividends and let the compound interest grow. DO NOT TOUCH IT until you hit the amount you can draw 4% per year without depleting your accounts. Once you hit that point you can retire and are fully financially independent. Check out the wiki on r/bogleheads if you want more info.

BobbyBucherBabineaux

CDs and TIPS

Timbo1994

The interesting question is equities vs TIPS/other inflation linked bonds. If other bonds crash it might just be that the currency is devaluing. TIPS are a bit more powerful.

BottleMedium881

Longer-term TIPS are definitely more exposed to interest rate moves. The inflation adjustment protects principal against CPI over time, but the ETF price can still fall if real yields rise. Short-term TIPS like VTIP are less volatile because duration is lower. So longer TIPS may outperform if real yields fall, but they can hurt more if rates keep rising.

VeryStableGenius

> longer term treasuries will lock that higher yield in for longer but who knows when or at what yield that happpens. Long term TIPS will also appreciate spectacularly if there is a recession and another round of QE to bring down mortgage rates and corporate long term borrowing costs.

KissmySPAC

TIPS but if bad things happen, the gov will bulk.

GrandRare1634

Username checks out. I think my confusion mostly comes from the ETF being more of a bundle of TIPs that are constantly rotating out, as opposed to one I bought direct from the government. Does a higher yield equate to higher dividend/distribution payouts, at least for TIPS?

Ancient-Swordfish292

Based on them saying real yields not consistently seen since before 2008, I think they're talking about TIPS yields, which are real.

Atlas-Scrubbed

TIPS in Roth accounts are fine.

FrankDrebinOnReddit

A lot of things can happen in a corrupt administration, involving TIPS, nominal Treasuries, your stock holdings, your personal freedom, etc. That's always a risk in investing (or just living).

Fiveby21

My concern with TIPS is that... could not a corrupt administration "fudge the numbers" and offer inflation adjustments that are lower than actual inflation?

Griffisbored

TIPS are based of CPI and the new fed chair has already publicly questioned the methodology for calculating inflation. CPI is already lagging behind real world inflation as it is, could get a lot worse if they start tweaking calculations to justify lowering interest rates.

zachmoe

The risk in Bonds is interest rates going up. Assuming interest rates follow inflation up, that means the value of your TIPS will get smashed. I prefer FRNs.

prestodigitarium

I just mean that with TIPS, you're taxed on the inflation adjustment portion, so you're losing money in real/inflation adjusted terms if the fixed interest portion doesn't make up for it. For a while, that fixed interest portion was basically zero, but looks like it's higher now for the 30 yr at least, so it's not a guaranteed loss, depending on what happens.

ATPsynthase12

Bonds are good at protecting already earned assets. It’s why they recommend some form of Glidepath with any investing account as you get up in age because nothing sucks more than losing a few years of retirement income in one swing of the market. Bonds are also good with reducing drawdowns and volatility in an active growth portfolio however it does hamper growth to a degree. Generally I recommend people hold a percentage of bonds in their portfolio at first or at least until they assess their tolerance to drawdowns then scale up/down as needed. There really isnt an alternative to TIPS/bonds, as even gold has to deal with its own commoditized market fluctuations.

youngishgeezer

What about TIPS?

1UpUrBum

Gold doesn't like rising interest rates. Wait for a 50-60% retracement then have a look. XAU-USD $3600-3200 (US gold) Copper will have wild fluctuations. No convexity unless you time options. Holding is a concave money eater. You shouldn't mess around with that stuff unless you know how to handle it. Short term bonds T-bills, TIPS.

FrankDrebinOnReddit

It could of course change, but not because of this. The Fed uses Core PCE, while the TIPS adjustment uses CPI-U. The *Treasury* could change that, but not the Fed.

Hummin2k

The new fed chair has been pushing to change the way inflation is calculated. Is there any chance this could end up factoring into TIPS?

FrankDrebinOnReddit

TIPS exist if you specifically want inflation-adjusted bonds. Otherwise it's equities and their associated risk. Keep in mind that sovereign funds operate under a very different assumption from most retail investors: their time horizon is unlimited, with liabilities due all throughout. For a retail investor, equities are still the way to go for long time horizons.

Zaros262

That's what Treasury Inflation Protected Securities (TIPS) are

Mother-Grapefruit-45

youre right that the real rate you can calculate from TIPS or headline minus nominal is an idealization. the market implied real rate and the actual purchasing power erosion people experience are two different numbers. the part thats underappreciated is that treasury supply is also a factor. the deficit is running 2 trillion a year and foreign buyers are pulling back. china sold 53 billion in treasuries last year. japan has been a net seller. so yields are rising partly because theres just more supply hitting a shrinking buyer base. thats not the same as saying inflation expectations are rising faster than yields. its saying the term premium is expanding because the marginal buyer of 30 year paper wants more compensation for duration risk in a world where the issuer keeps printing.

VeryStableGenius

I prefer to see it as "2.5% returned over inflation for 20 years" (TIPS) So bonds have a 'real P/E' of 1/0.025=40, while NASDAQ has a TTM P/E of about 37, so the equity risk premium is gone. However, this assumes some means of avoiding taxes on the full inflation-inclusive bond interest.

technojoe99

TIPS is a rip off, because it only protects you from the inflation the government is willing to acknowledge, and all of the government's metrics drastically understate inflation.

zachmoe

I would argue TIPS would do okay in deflation, because they cannot adjust below par.

stoplossftw

you can re-invest the interest paid in higher risk assets of your choice while your initial capital is inflation protected so you have to factor that aspect as well when counting the value of TIPS point was TIPS offers downside protection for initial capital

TradeXClub

You’re right that real rates are the mechanism. But there’s a tension worth examining. The gold selloff makes sense mechanically — rising nominal yields + sticky inflation = rising real rates = higher opportunity cost for zero-yield assets. Classic. TIPS-implied real rates moving up forces gold lower regardless of CPI prints. But here’s what doesn’t fully add up: The 114-dollar single-day drop with silver collapsing from 88 to 75.89 is not just “real rates repricing.” That’s liquidation behavior. Someone large was forced out, or there was a margin cascade. A clean real-rate repricing doesn’t move silver 14 dollars in days. A few things to watch: • Warsh’s “regime change” language is the real wildcard. If he signals the Fed will redefine how it measures inflation (trimming shelter, changing PCE weights), markets don’t know what the reaction function is anymore. Uncertainty of that kind historically supports gold, not crushes it. The selloff may be premature. • Hormuz staying closed means energy inflation is structural, not cyclical. The bond market can price it, but if WTI stays elevated and wholesale gasoline stays up 15%+ month over month, the “real rates win” trade has a ceiling — because eventually nominal inflation outruns the yield move again. • The Boeing/Nvidia outcome from the Trump-Xi summit tells you the trade architecture is still fractured. Huawei Ascend blocking the H200 deal is not resolved. That’s a supply-side inflation input the bond market hasn’t fully priced yet. • Silver’s drop is interesting — silver has industrial demand (solar, EVs, semiconductors). If silver collapses harder than gold, it’s pricing a growth slowdown, not just real rate repricing. That’s a different signal. Stagflation fear, not just inflation fear. The honest summary: Gold is caught, yes. But a one-day 114-dollar move with silver down 14 points smells like a positioning flush, not a clean macro verdict. The real-rates trade wins until Hormuz opens or Warsh’s new inflation measurement framework turns out to be more dovish than feared.

GAV17

The 1y projected inflation is below that number, that's why you can buy 1y TIPS at positive rates. If you think the market is wrong about CPI numbers, just buy those.

stoplossftw

yes, TIPS and chill!

stoplossftw

yes, The Bank via TIPS!

stoplossftw

in a way,yes but treasury bills yields are fixed once bought Treasury Inflation-Protected Securities (TIPS) are specifically designed for inflation defense

stoplossftw

so leveraged TIPS ETF? 🤔

I_love_data1111

TIPS enjoyer when he realizes not all things Inflate on same scale.

james_12monkeys_fyi

The honest answer to "fully insulated from an AI unwind" is nothing — index concentration means a Mag-7 drawdown drags everything for a quarter or two (the top comment is right on that). But "insulated from AI" and "keeps up with inflation in a stagflation path" are two different questions, and the second has better answers. What tends to hold real value when inflation is supply-driven (energy, food, materials) rather than demand-driven: commodity-linked producers and real assets — energy, fertilizer/ag inputs, shipping and hard infrastructure — because their revenue reprices with the inflation instead of being discounted by it. That's the actual mechanism: long-duration tech is priced off a discount rate that rises in stagflation; a barrel of oil or a ton of potash isn't. Short-duration TIPS and T-bills (someone mentioned bills) protect purchasing power but won't compound — they're a parking spot, not a growing hedge. The catch nobody likes: real-asset trades are cyclical and volatile, and they only work while the inflation impulse persists — if oil rolls over and it turns into a plain recession instead of stagflation, they get hit too. So it's less "find the one safe asset" and more "which regime are you actually positioning for" — an AI-bubble-burst-into-disinflation and a supply-shock stagflation want almost opposite portfolios.

StatisticianNo4044

I disagree regarding TIPS in general, which have proven in the field to perform poorly in inflationary times (e.g. 2022). Short term TIPS might be relatively ok.

Piyushhdangii

Usually some mix of commodities, energy, gold, TIPS, and international exposure gets mentioned for inflation/geopolitical hedging. The exact percentage matters less than avoiding being too concentrated in one country or asset class.

hugh2018

You mentioned you don’t consider your plan to sit in cash to wait for a crash to be market timing. It absolutely is. Your plan is to stay out of the market and return exactly when? At the right time, of course. That’s market timing by definition. If concentration is your concern, you still have tons of options. Sidelining all your money because of concentration concerns is a head in the sand choice that pretends the S&P is the only way to invest. There are so many ways to deal with your concern constructively. SCHD focuses on fundamentally sound, dividend-paying companies with financial health screens. Because of its formula, it naturally has almost zero exposure to non-dividend or low-dividend mega-cap tech like Nvidia or Amazon. It forces a portfolio into boring, cash-flowing sectors like Financials, Healthcare, Consumer Staples, and Industrials—the exact opposite of an AI bubble. RSP holds the exact same 500 companies as SPY or VOO, but it gives every single company an equal 0.2% slice. Tech drops from a dominant 30%+ of the index down to just its mathematically equal share. It historically outperforms market-cap weighting during periods when market concentration unwinds. And there’s VXUS. European, Japanese, and emerging markets don’t have the same mega-cap tech dominance as the US. International indexes are far more heavily weighted toward financials, industrials, and materials. It’s an instant macro-diversifier away from Silicon Valley. Valuations are far more favorable internationally than in the US. International diversification is a robust hedge against US scenarios like the lost decade. The list goes on. If you’re hell bent on staying on the sidelines, SGOV is great for matching the Fed rate, but it doesn't have an explicit inflation tracker built-in. Short-term TIPS are mathematically indexed to the CPI. You can go with VTIP. If inflation spikes again due to geopolitical energy shocks or anything else, the principal adjusts upward to guarantee purchasing power is protected, with zero stock market risk.

skilliard7

I think it was higher at like 5.17% for like a few hours, but that's about it. For 30 year TIPS, its the highest since 2007.

No_Feeling920

Just look at TIPS yields over the last decade and compare it to ordinary bonds. It's a scam.

Certain_Actuator6870

thank you so much, for a risk averse investor would it be correct to say hold the Market portfolio with Beta = 1, and a combination of the asset classes you mentioned (TIPS + commodities) in a proportion depending on how risk averse you are?

BottleMedium881

I’d frame it less as “add one magic hedge” and more as adding assets that behave differently when inflation or geopolitical stress hits. For inflation, TIPS, short-duration bonds, commodities, energy/infrastructure equities, and some real estate exposure make sense. For geopolitical shocks, gold and high-quality government bonds are the classic diversifiers. For a balanced portfolio, I’d explain it as maybe 5-10% gold, 5-15% commodities/real assets, and a meaningful bond allocation tilted toward short duration or inflation-linked bonds. The exact proportion depends on risk tolerance, but the point is not maximizing returns, it’s reducing sensitivity to one macro outcome.

skilliard7

30 year TIPS provide adjustments based on inflation and yield over 2.8% right now.

skilliard7

30 year TIPS give over 2.8% AFTER inflation right now. So they are pricing in 2.3% inflation relative to the regular 30 year treasury.

skilliard7

That's what TIPS do. Their principal and interest payments are tied to the CPI rate published by the BLS. Right now you can get 2.8% yield + inflation adjustments with 30 year TIPS.

Scedasticity1

It doesn't work like that. All existing debt would continue to pay the same coupons, independent of market yields. TIPS would float along with inflation and newly issued debt would be much more expensive, but old debt would be unaffected.

ImportantCommentator

TIPS

Amazing_Candidate976

I’m surprised at the amount of people saying SP500/index/total market based on your question with SAFEST being the first word and SOLID 6%. Equities should be out of the question (idc if they are low volatility dividend stocks) if there’s a 15% market correction the chances of your dividend stock not going down with the market are low. If you are in fixed income and hold to maturity you are guaranteed your principal (par value) and you’ll get the coupon interest payments. Only answer I saw make sense was the 75% treasuries one with selling puts. Although I’d rather go 100% and sell calls just for my brain. I think definitively you want to be looking at treasuries, municipal, or corporate bonds. Treasuries won’t get you to the 6% you’ll have to do something extra (like option), but you won’t lose the principal (ASSUMING YOU BUY THE ACTUAL TREASURY NOT AN ETF). The higher the yield on a corporate the riskier the investment, but also look at ratings, A, AA, BBB, etc. stay away from “junk” bonds. But, not every broker offers bonds sooooo sometimes you just gotta deal with the cons of the ETFS. If you go down the treasuries, municipal bonds path you’ll have tax advantages too. I would look into TIPS (Treasury Inflation Protected Securities) too. They are a more complicated instrument with some unfortunate tax implications unless you use a tax-advantaged account, but they can outpace normal treasuries depending on inflation numbers and you must hold to maturity to reap that benefit. Lastly, just know that owning the actual bill, note, bond and buying the ETF are not apples to apples. You have no control over what your exit price will be since these funds have no maturity like the actual instruments they hold. You are not guaranteed a par value back.

walt128

I wish I understood how the fuck TIPS work

deepserket

The humble TIPS 👉👈🥺

toolfan21

TIPS

AnalyticalAlpaca

That’s not true at all. There’s TIPS, I Bonds, foreign currency, assets, etc.

skilliard7

That's what TIPS are for. If they try to inflate it away, the principal goes way up.

advantage_player

I hope you mean long term TIPS

D74248

A TIPS ladder.

Educational-Ebb9248

Buy some TIPS if inflation is your concern. Won’t return 💩 but it’s risk free

skilliard7

In my case my horizon is 30 years. - Despite believing they are overvalued, I still hold some SP500/total market index funds just to save myself from FOMO, just a smaller part of my portfolio than most people. - I'm continuing to hold onto my FLKR shares despite the insane performance of the past year(I'm up 270%). In part because I don't want to pay taxes on gains, but also because I think the windfalls to SK Hynix/Samsung workers will really pump the Korean economy(SK Hynix workers getting $477k bonus this year, potential $900k next year, Samsung workers likely getting similar.). I'm reinvesting the dividends elsewhere though. - Buying long term US 30 year TIPS/VGLT. Bond yields are higher than SP500 earnings yield for the first time since the tech bubble. I think a recession is also likely soon. Either interest rates fall due to recession, and I make as much as an 80% gain in short term and then go back in equities, or I earn what I consider to be a reasonable return long term if interest rates stay elevated. - Some REITs for exposure to real estate. - Some consumer staples companies trading at very cheap valuations just to diversify a bit, these are all small holdings.

AnalyticalAlpaca

I have similar macro concerns as you. I’ve bought some TIPS / I Bonds and have looked into emerging market non-usd bonds which should perform well if inflation hits harder (e.g. EBND).

skilliard7

SGOV/SPAXX are not really hedges, they hardly move at all. They are just reducing exposure to equities. A hedge is generally an asset that moves inversely to another. A better hedge would be: - VGLT/TLT for hedging against recession(long bonds gain a lot of value when economy nosedives and fed does QE) - VTIP for hedging against a short term boost in inflation(TIPS go up in value based on CPI inflation index)

VeryStableGenius

Coupon plus discount to par is 2.68% for 30 year, right now. You can always sell one or two to cover the tax. There's not much of a difference between that, and paying tax from a higher coupon. Yes, you're getting taxed on inflation, outside a retirement account. A lot of people here have money in retirement funds, though. This is a strategy with two purposes: 1. preserve real capital in an over-exuberant market, taking advantage of unusually high real TIPS rates. 2. make a bet on a fall in long term rates (eg, more QE in a recession). This is meant to be a haven to prevent loss, not a moneymaker (except if real rates fall, in which case ... woo hooo!)

ImportantCommentator

TIPS

Nice-Truck8806

I don't see any 2.7% coupon TIPS trading now...the highest is a 3 year at 2.5% par 103

VeryStableGenius

I'm assuming that a lot of people here are investing in sheltered retirement funds. Any bonds become worse when taxed because of taxation of inflationary component. With really high inflation, this could result in negative growth. But I don't think it's such a bad problem in most realistic inflation scenarios. Suppose you have a $100 bond and there is 5% inflation and a 2.7% coupon. Principal goes up by 10% to $105. You get paid 2.7% of the new amount, or $2.83. Your taxable income is $7.83. In a 25% tax bracket, your tax is $1.96, payable out of the coupon. You're still beating inflation, even after tax. Someone who is contemplating buying I-bonds ($10K limit a year) might not be hitting the tax brackets that would cause TIPS headaches. (Ion't see why you got downvoted for pointing that out, though)

tritisan

You’re correct. I bought TIPS for my kids’ UTMA accounts a while back. And boy was I unpleasantly surprised during ‘23.

Nice-Truck8806

I-bonds are a better product than TIPS. TIPS aren't bad but the variable principal would make taxes a nightmare during an inflationary period.

VeryStableGenius

> The alternative is inflation making holding cash at 4% worthless .... what other choice do I have? How about [TIPS](https://www.bloomberg.com/markets/rates-bonds/government-bonds/us), paying a historically generous 2.7% over inflation?

Gullible_Ad3785

Not all indexes.  Depending on what the fed does some TIPS, bonds, or other less common indexes should do fine.

rbraalih

I buy up to 5 years and hold to maturity. Too regarded to understand price movement in the interim. Also some longer index linked stuff (TIPS in us terms)

Ancient-Swordfish292

I think this is the correct perspective. Occasionally, I am tempted to buy 30-year TIPS in a Roth account, but 5% real beats 2.7% real, so broad equity index funds it is. I do have my emergency fund in Series I savings bonds.

D74248

> See what I mean, it’s always derogatory to people. It is aggravating. So many overconfident, arrogant people around here who lack curiosity. I wonder how many of these guys (and I am sure that they are all guys) could setup and understand a TIPS ladder.

BobbyBucherBabineaux

Literally fucking same. The one gd time I follow WSB advice (even after seeing the GME post in the wild before the squeeze) and I piss down my pants and buy TIPS instead. Side note: I also dry hump my couch while watching blacked.

NixaB345T

I think there was no tax on TIPS or am I misunderstanding?

Affectionate-Bid386

Don't buy TIPS.

Cav829

Global bonds are interesting. Something like BNDX has been honestly very steady since 2002. But it's also been fairly in line with just the no sweat option of USFR/SGOV (plus those have tax benefits). Personally, and this is more what I am doing than necessarily financial advice, I am largely sticking to short-term options like SGOV, USFR, or just straight buying iBonds or T-Bills. Or you could look at TIPS. Sure, there's a little less upside, but the idea of bonds is not to be a vulnerable asset to market disruptions. I do know people look at TLT at pretty historic-low levels and think it looks incredibly tempting. I actually did add some TLT to my portfolio when it crated and rates went toward 4.5%, but I sold off maybe a week and half ago as the conflict looked likely to continue. Mind you, if you're looking at 20 years+ into the future, you're safe to put the money there. That said, look at today, are bonds moving with the news of potential global risk because the situation in the Middle East is a problem, or is it just moving with the 10-year yield? TLT is down over half a percent. As long as it correlates with the movement of the 10-year and isn't showing the classic properties bonds do of serving as a hedge, I think you'd be better off not leaving yourself vulnerable.

u_spawnTrapd

There’s not really a clean win setup in that kind of environment, it’s more about tradeoffs. Inflation eats cash, but downturns punish equities, so people usually look at things that at least have some inflation linkage or pricing power. Stuff like commodities, energy, or even certain value stocks can hold up better, but they’re still volatile and very cycle dependent. Some people lean into TIPS or short-duration bonds just to reduce risk while not getting completely wrecked by inflation, but you’re not getting big returns there either. It’s more capital preservation. The hard part is that these regimes tend to shift before it’s obvious, so going all-in on a scenario can backfire fast. That’s why the boring answer of staying diversified and adjusting risk a bit instead of making a big directional bet still tends to hold up over time.