TIPS

sanyasea

Imagine thinking TIPS or index linked gilts protect you from inflation.

Timbo1994

I am in the UK and have 10% of my portfolio in inflation-linked gilts here (equivalent of TIPS). I am a little addicted to them - I think they're a great concept as an asset and quite a lot lower risk than cash/other bonds.

Swirl_On_Top

So, what inflation hedge y'all doing? - US stocks - International Stocks - Real Estate - Precious medals - Cryptocurrency - Commodities - TIPS Any others?

tinydisaster

His chair ends in May. His governor seat with voting rights goes in January of 2028. Lower rates do not simply equate to line goes up. They can redefine inflation and choose to ignore the dual mandate. This pisses off bond holders who own 38T of our debt, as inflation eats away their yield and the TIPS system breaks down. Miran said this in an interview on Bloomberg if you’d like to hear their plan. They can open up lines of credit with the fed in an emergency basis. There is a lot that a compliant fed can do that is dangerous when it’s not politically independent. Our currency is often stated as having exorbitant privileges because of our independence and credibility.

gravescd

Treasuries have a constant coupon rate regardless of inflation, except for TIPS. They are cash flow and their price is based substantially on the NPV of that cash flow. Gold is a universal intermediary among currencies with almost no intrinsic value. Its price is supply/demand and vibes. These are entirely different assets and have different functions in a portfolio. OP wants to replace Treasuries due to uncertainty in the dollar, so it doesn't make sense to suggest a non-cash flow asset with totally different pricing dynamics. There are plenty of bonds out there not tied to USD liquidity.

zachmoe

>Fixed income investing is difficult even for pros.  Agreed, which is why I recommended Floating Rate Notes, the risk in Bonds, besides inflation which is a given even with TIPS, is interest rates going up.

EhGrillGuy

Thanks for making it so obvious, there TIPS.

Important-Advance767

By the time you’re 40, if you contribute $5k/mo and make no additional gains, the total portfolio value will be $2.4M. $60K/$2.4M = 2.5%. You need a 2.5% annual gain to never work another day in your life once you’re 40 (without accounting for tax and inflation). An 80-20 (bond-stock) split would be plenty here, with a good chunk of bonds in TIPS. Not financial advice.

er824

When I last checked Schwab's Treasury MMFs were yielding less than SWVXX. I'd save state taxes with SNSXX but the tax savings didn't make up the yield difference. SGOV and USFR are ETFs that invest in ultra short term government bonds. SGOV invests in 0-3 month Treasury Bonds and USFR invests in Floating Rate US Treasuries. There are several other ETFs that invest in ultra short term Gov't bonds that are equivalent. I actually have a bit of SWVXX but most of my uninvested cash is in USFR. I haven't checked recently but when I last checked it was yielding slightly more then SWVXX and is state income tax free. The key is they invest in ultra short term securities so you don't have the same interest rate risk you have when investing in longer term bonds. A Money Market Fund keeps a constant share price of $1, orders execute every night and you get paid interest monthly. A Treasury ETF trades like a stock. It has the same limitations of other ETFs at Schwab, no Fractional shares. USFR's share price hovers around $50 and SGOV around $100 so if your dealing with small amounts of cash that can be a pain. If you look at a price graph you'll see they make a nice sawtooth pattern. That's because they slowly increase in price throughout the month as they accumulate interest then drop when the interest is distributed. All of these are fine options and are easy to switch between. You mentioned iBonds and TIPS. You can only buy iBonds directly at Treasury Direct. You can buy TIPS at Schwab, either directly, via a Mutual Fund (SWRSX), or via numerous ETFs (SCHP, TIP, etc). Schwab has other options for cash as well, T-Bills, CDs, etc.... I dabbled with T-Bills for a bit but it was more effort then it was worth and just started buying the ETFs instead. The convenience was worth the minor cost to me.

Chemical-Fun3692

Interesting! If you are using Schwab, I am on the research tab, under Money Market Funds and I only see the SWVXX under “Prime Money Funds”, where is the USFR and SGOV located? I clicked on ETFs and typed SGOV, and it says it’s an “ultrashort bond”, Does that mean it’s a bond or ETF? Is this like an iBond or TIPS? Do you get a return on these like the Money Market Funds? Is there a reason you prefer to buy the short term treasury ETFs in addition to the SWVXX? I am curious why you don’t choose Government and Trrasury Money Funds like SNVXX, SNOXX, SNSXX, or the money market ETF like SGVT? All of these have a 7 day yield.

Vivid-Link9806

I wish you best of luck, but based on your posture you’re very likely to lose a lot of money. I’d recommend TIPS

jonnycoder4005

800 million in TIPS 100 million SP500 100 million in SGOV - live off this

MrDinglehut

If they're cook'n the books then TIPS are not a hedge against inflation.

ConcentrateOk523

Bad for TIPS bonds. Need to get rid of VTIP, big mistake to buy it.

VerdantPathfinder

50% in world stock fund/etf, 25% in US bond fund, 25% in TIPS bond fund. But I'm hoping to retire in 2-5 years. If I was still in accumulation phase 100% world stock fund/etf.

raisedeyebrow4891

Why TIPS

adrr

Wow that’s negligence. Since this report is used for TIPS bonds, wouldn’t it be a technical default if data is verifiable inaccurate? I own a bunch of TIPS and I am getting screwed.

bank_truth

The 80s rates came with 12-14% inflation. Your coworker probably left that part out. Real return was basically zero after inflation ate into everything. Right now the Fed just cut rates and they're likely to keep cutting. CD rates will probably keep dropping from here. You can check our website if you want to see what's available now, but don't expect them to climb back up anytime soon. If you want something low risk that outpaces inflation slightly, you might look into TIPS or I-Bonds. They adjust with inflation so your purchasing power stays intact.

theWesternReserve

Anyone got any HOT TIPS on a SURE THING

remmy623

Sorry not sure what you mean by an amount of time to break even. A TIPS ETF will be buying new TIPS bonds as the old one mature so there's not really a "time frame" on it from your side - it could go on forever. You can look at TIPS break-even rates to see what inflation needs to average in order for TIPS to outperform nominal bonds. Basically is nominal bonds yields vs TIPS real yield. https://fred.stlouisfed.org/series/T5YIE

remmy623

Holding direct TIPS can create some headaches for retail investors because there's federal tax on both the small fixed coupon payment AND annual changes in principal even before maturity. This is because the coupon is fixed and the reflection of inflation happens via adjustments to the principal. So there are two other options you can use in combo - I-Bonds - very similar to TIPS, can buy via treasurydirect - only offered to retail investors, limited to buying 10k a year. Inflation calc happens via changes in coupon and tax is deferred. So it's a lot cleaner but you're more limited in amount. Also some early redemption penalties. Additional option is a TIPS ETF. Avoids having to manage the unique tax implications - pushes to more just the normal ETF tax implications 

FunnyGeologist7278

My other post was removed before I could see comments. Somebody here mentioned TIPS, which I’m going to look more into.

FunnyGeologist7278

Hmmm I need to get some of these TIPS. Are they okay to hold in a taxable brokerage account?

remmy623

If you're looking to protect against inflation you can always just buy a type of bonds called TIPS to maintain your purchasing power. They also have funds that focus in these. If youre already looking at CDs - you can definitely lock in a 3.5%+ rate for ten years which would be higher than the historical average annual inflation

Kaa_The_Snake

Well I’m close to retirement and am building a cash (TIPS, actually) bridge because I know my luck, the market 100% will crash the day after I retire!

Mefibosheth

There's always TIPS.

skilliard7

TIPS have a 2.6 to 2.7% real yield.

gardenia856

Annuities can be useful to cover a clear needs gap, but they aren’t a no-brainer for most. I’ve seen the permission-to-spend effect too, but you pay for it with lower liquidity, ordinary income taxes, and usually a lower expected return than a simple Treasury/TIPS ladder. The way I’d use them is narrow: figure essential spend minus Social Security/pension; size a plain SPIA or small MYGA to that gap; keep the rest in a basic stock/bond mix and a 5–10 year Treasury/TIPS ladder so you’re not forced to sell in bad markets. Avoid complex riders and long surrender periods, buy from A-rated insurers, keep below state coverage limits, and ladder purchases over a couple of years to manage rate risk. In IRAs, I’d only consider a late-life hedge like a QLAC, not a big allocation. For quotes, I start at Blueprint Income, compare MYGA terms on Fidelity’s platform, and also check Gainbridge when I want a plain fixed rate. Bottom line: buy guarantees only for the gap you must cover, not the whole portfolio.

PolitzaniaKing

Future inflation... The mechanics of how markets signal long-term expectations ## 🏦 How a 30-Year Bond Reflects Inflation Expectations - **Nominal Yield as a Signal** The yield on a 30-year Treasury bond represents the return investors demand for lending money to the U.S. government for three decades. That yield incorporates: - Expected real interest rates (the "true" cost of money). - Expected inflation over the 30-year horizon. - Risk premiums (like uncertainty about future inflation or fiscal stability). - **Real vs. Nominal Bonds** - **Nominal Treasuries**: Their yields rise if investors expect higher inflation, since inflation erodes the purchasing power of fixed coupon payments. - **Treasury Inflation-Protected Securities (TIPS)**: These adjust payouts with inflation. Comparing 30-year nominal yields to 30-year TIPS yields gives the **breakeven inflation rate**—the market’s implied average inflation expectation over 30 years. - **Breakeven Inflation Rate** \[ \text{Breakeven Inflation} = Y_{\text{Nominal 30yr}} - Y_{\text{TIPS 30yr}} \] Example: If the 30-year nominal yield is 4.5% and the 30-year TIPS yield is 2.0%, the breakeven inflation expectation is about 2.5% per year over the next three decades. - **Market Confidence & Anchoring** - If breakevens stay near the Federal Reserve’s target (~2%), it signals confidence that inflation will remain controlled long-term. - If breakevens rise significantly, it suggests investors expect persistent inflationary pressures. - If they fall, it may indicate fears of deflation or very weak growth. --- ## ⚖️ Why It Matters - **Policy Insight**: The Fed watches long-term breakevens to gauge credibility of its inflation target. - **Investor Strategy**: Pension funds, insurers, and individuals use these signals to decide between nominal bonds, TIPS, or other inflation hedges. - **Economic Narrative**: A stable 30-year breakeven suggests markets believe inflation shocks (like energy spikes or supply chain issues) will fade over time. --- 👉 In short: the 30-year bond doesn’t just tell you what investors want today—it’s a window into how markets collectively price inflation risk decades into the future.

D74248

> The people suggesting inflation linked bonds aren't correct. If it's low growth high inflation, chances are sooner or later rates will be hiked and those bonds are going to drop in value regardless of the CPI linking. This is an example of the difference between open ended bond funds that buy sell/sell to maintain a duration and a bond ladder where the bonds are held to maturity. The former is as you describe, but there is no interest rate risk for the latter. And TIPS are easy to buy in a brokerage account.

SpellAccomplished541

Do I-bonds pay more than TIPS? I'm retired and locked some money into a 5.9% single premium deferred annuity, but I wouldn't mind locking a little more into something safe and inflation adjusted.

giraloco

TIPS, cash, short treasuries US and International, stock of solid companies with strong balance sheets, real estate, a 2.5% fixed mortgage if you have it. Avoid expensive assets like gold, no long bonds, no speculative stocks, no discretionary company stocks.

Fiveby21

It's not risk-free. You have inflation risk. And even with TIPS... can you really trust the government to provide accurate inflation statistics anymore?

giraloco

TIPS are more likely to pay a real interest rate but that assumes BLS provides accurate inflation stats. If interest rates spike the bond value will collapse. I have a small amount of long term TIPS. I feel cash is safer.

oldirishfart

20Y TIPS bond yield is at around 2.31%

Sagelllini

I'm 68, and retired, and believe in owning stocks and not bonds. They don't need the money now and have 7 to 10 years ahead in the accuulation phase. There is no reason not to be 100% stocks. I prefer 80/20 VTI/VXUS but the Schwab equivalents will likely perform virtually the same. You can go with you plan and just forget the bonds and TIPS, because they won't perform as well as the others and if the market does have a hiccup having 15% in them isn't going to save the other 85%. It would also be more tax efficient for them. You don't need the advisor and whatever they would charge. Just DCA as you suggest.

dbasea

Solid start; the proposed 85/15 tilt is aggressive at their age and S&P plus total US is redundant, so consider a simple three-fund mix (total US, total international, core bonds) at 60/40 to 70/30, rebalance yearly or at 5% bands, use ETFs for tax efficiency (mutual funds can ease automation), DCA if it helps behavior though lump sum has higher expected return, and keep bonds/TIPS in tax-advantaged with equities in taxable. A one-fund balanced or target-date option is convenient but less tax-efficient in taxable accounts, and unless they want full planning on taxes, Social Security timing, withdrawal sequencing, and estate work, a one-time hourly or flat-fee review is usually plenty instead of ongoing AUM.

Richifyai

Your allocation is solid for mid-60s with 7-10 year timeline. The 85% stocks / 15% bonds+TIPS split is reasonable given they don't need the money immediately and can handle volatility. On your questions: 1. **Does it make sense?** Yes. Diversified across US, international, emerging markets, with some bonds for stability. At their age with that timeline, this works. 2. **Pitfalls?** The advisor wanting to "manage" a simple ETF portfolio is the biggest red flag. What are they charging? If it's 1% AUM to just rebalance basic Schwab ETFs, that's $5k/year on $500k - total waste. Your parents can do this themselves or pay a fee-only planner $2k for a one-time plan. 3. **Simpler option?** SWYNX (Schwab Target 2030) or similar target date fund would be even easier - one fund, auto-rebalancing, done. But your allocation isn't overly complex. 4. **Is advisor necessary?** No. This is straightforward. DCA $5-10k/month into those funds at Schwab, rebalance annually. They don't need someone charging ongoing fees for this. If the advisor is fee-only (flat rate), fine. If they're charging AUM fees, skip it. Your parents can handle this with minimal effort.

D74248

> So your answer is invest nothing. CDs and TIPS are not investment vehicles? Best of luck to your clients. They are going to need it.

Mantissquirrle

For RMDs, safety is key. A bond-heavy portfolio (70-80%) with some equities is a solid foundation. Consider breaking this into: 1. Cash buffer: 1-2 years of distribution needs in money markets/HYSA/short-term CDs 2. Core portfolio: Bond ladder (individual bonds or ETFs like BND, SCHZ) plus quality dividend stocks or ETFs (VYM, SCHD) 3. Inflation protection: Small TIPS allocation and possibly I-bonds (annual limit applies) Since they have expenses covered by pensions/SS, this money can be more preservation-focused. Tax considerations are crucial - if they don't need all RMDs for expenses, consider Roth conversions or QCDs to charities to manage tax impact.

HeftyCompetition9218

TIPS are inflation adjusted, ordinary bonds are not. So with ordinary bonds say at 5% yield with 5% inflation you get 0. If I’m European and paying in euros for US bonds and the USD deflates 20% of my 100$

ImaginaryHospital306

I don't touch my retirement accounts that are entirely in broad market index funds. For the 10% of my portfolio that I actively manage, I am building cash and mostly invested in TIPS funds at the moment, save for a few blue chips I have owned for years.

gmanisback

TIPS are at least better than that

inthehill

I went and looked because you made TIPS sound more compelling which they are. Since deflation is really bad and would be avoided at all costs, and the same example I gave, the principle of a TIPS would increase by “25%”, heavy rounding here, and a $1000 10 year TIPS at maturity would be worth $1250 (again simple math not accurate)

MysteriousCoat1692

TIPS are guaranteed to match inflation plus a real rate above inflation that changes based on various factors. Most recently, the real rate on long-dated tips was >2%. People hold TIPS with treasuries usually to account for unknown potential periods of deflation.

Dalewyn

TIPS are kind of complicated and hard to understand (I admit I don't fully understand either), but the gist is: The principal is adjusted up or down according to inflation/deflation; during deflation you can potentially lose your principal despite being bonds. The interest meanwhile is paid out like most other bonds. So TIPS protects your purchasing power rather than your absolute dollar value while giving you some interest as an incentive like other bonds to hold them at all.

inthehill

100% agree with you and your comments. Here's my thing... Inflation is cumulative. If inflation is 2.5% per year, at the end of 10 years you're paying 25% more. Correct me if I'm wrong, but TIPS are just adjusted per year, right? So you'll get 2.5% additional each year, but not 25% more in year 10.

Dalewyn

> Bonds do not keep up with inflation. Never have, never will. I Bonds and TIPS are by definition pegged to inflation (along with a small bonus in the case of I Bonds). I Bonds are preferable but TIPS are easier to purchase and sell in bulk on demand, they will both protect your purchasing power. >If I had to do it all over again, I would have never put a dime of my "retirement" accounts in anything but aggressive bond-free. Quite right. Treasuries and state/municipal bonds have various tax saving considerations that overlap significantly with retirement accounts. It's perfectly reasonable to hold them in taxables so long as you've given it all proper thought. Speaking quite generally, you should hold in bonds/cash whatever money you expect to *need* within 5 to 10 years. Taking into account whatever other monies you have outside of retirement funds that could also be budgeted for such purposes.

JackfruitCrazy51

My focus right now is bridging the health care gap from 60-65. I've been doing a lot of Roth the last few years so that I can keep my income below that 400% level for ACA. I've also been trying a bucket strategy for those 5 years, where I'm doing some CD/TIPS ladders. It will be a tricky time, because those years would be great times to do Roth conversions, but that would interfere with the ACA discounts, which could be huge. As far as investment choices, over the last few years the majority of my retirement savings has been in 2040 TDF's. From age 35-50, I was 90% S&P500. From 25-35, I thought I was some kind of genius and had about 15 different things selected in my 401k.

JewelerSimilar2141

Better buy TIPS

Typical_Breadfruit15

it is very simple if 30-years treasuries pays 4.75% and TIPS pays 2.48% it means that the consensus among investors is for an inflation rate of 4.75-2.48=2.27%. If you think that in the next 30 years on average inflation will be higher then go ahead and buy TIPS, but whether or not you'll make more it depends only on how the future economy shapes.

pigglesthepup

This really depends on your time horizon for this money. SGOV has already been recommended. Know that it's super short duration (0-3 months), making very similar to a HYSA. You could go for some longer duration but still short-term ETFs: SPTS: Short-term treauries, average duration 2 years BSV: 75% treauries, 25% corporates, avg duration 3 years VTIP: short-term TIPS (inflation-linked Treauries), avg duration 2.5 years If you know both exactly how much you need in the future and when, individual bonds or a CD are fine. I strongly recommend individual investors stick to government (treasury, agency, muni) when buying individual bonds. Anything else requires extra research and the disclosed financials aren't always truthful (see: 2008).

froandfear

Yep, and I'd add that you also have to be wary of the duration risk with TIPS. Many TIPS funds are intermediate-term. So you also have to watch out for periods where inflation is rising and rates are rising, which of course is common. There are very few macro environments in which TIPS are a good short-term investment.

skilliard7

False. TIPS of the same duration have MORE exposure to interest rates, not less.

theawarenessfund

Your math is correct, but there are a few catches that make regular Treasuries attractive: **1. Tax Drag (Big One):** TIPS inflation adjustments are taxed as income EVERY YEAR, even though you don't receive the cash until maturity. This is called "phantom income." Example: If inflation is 3%, your TIPS principal increases 3%, and you owe taxes on that increase NOW (even though you can't access it). Regular Treasuries: You only pay taxes on the coupon (4.75%) annually. **In a taxable account, this phantom income tax can wipe out TIPS' advantage.** **2. Liquidity:** Regular Treasuries have 10x the trading volume of TIPS. Easier to buy/sell without spread widening. **3. Deflation Risk:** If deflation happens (rare but possible), TIPS underperform. Regular Treasuries give you the full 4.75% regardless. **4. Market Already Knows This:** The spread (4.75% - 2.48% = 2.27%) is the market's inflation expectation. If the market thought inflation would be 3.2%, TIPS would yield less to compensate. **When TIPS make sense:** \- Tax-advantaged accounts (IRA, 401k) - no phantom income tax \- High inflation environment (>3% sustained) \- Inflation hedge portion of portfolio **When regular Treasuries make sense:** \- Taxable accounts (avoid phantom income) \- Deflation concerns \- Need liquidity

OnlyAdd8503

Are you not limited in his much TIPS you can buy in a year?

Dalewyn

Another way to look at this is that TIPS secures your *purchasing power*, not your *absolute dollar value*. TIPS will drop in value if deflation hits, but deflation means each dollar has more buying power. Inversely, TIPS will go up in value if inflation hits, but inflation means each dollar has less purchasing power. TIPS protects your purchasing power.

xanfiles

simple answer. There is a risk of deflation with TIPS. I know you read too much mainstream media who are absolutely sure that inflation is here to stay. But there are a few factors that may lead to deflation i) AI (technology is always deflationary) ii) Demographics. If we are shutting off immigrants, our birth rate is too low to keep up with population. iii) Trump chickens out or Supreme court may strongly rule Tariffs are illegal iv) Unemployment and job-losses are deflationary. v) Debt-defaults. Money is printed when loans/credit lines are created. Money is destroyed when loans are paid off or people default (like 2008) So, make no mistake there is a high chance of deflation that people are unaware (due to mainstream media)

xanfiles

simple answer. There is a risk of deflation with TIPS. I know you read too much mainstream media who are absolutely sure that inflation is here to stay. But there are a few factors that may lead to deflation i) AI (technology is always deflationary) ii) Demographics. If we are shutting off immigrants, our birth rate is too low to keep up with population. iii) Trump chickens out or Supreme court may strongly rule Tariffs are illegal iv) Unemployment and job-losses are deflationary. v) Debt-defaults. Money is printed when loans/credit lines are created. Money is destroyed when loans are paid off or people default (like 2008) So, make no mistake there is a high chance of deflation that people are unaware (due to mainstream media or TDS)

zxc123zxc123

"BLS now says CPI and PPI are -100,000% with healthcare basically free. I've made America great again! And now TIPS holders will now be required to PAY the TIPS TARIFF for ripping off the American people. They've been screwing us for so long under Biden. He's the worst president ever. I never sucked Bill Clinton's dick but if I did it would have been way better than Hillary's BJ. THANK YOU FOR YOUR ATTENTION TO THIS MATTER."

gcommbia34

Why? Wouldn't the TIPS still be paying the same (2.48% plus inflation), making it also more valuable if rates drop, because the drop would cause new bonds (both TIPS and nominal treasuries) to pay less? I get that the TIPS would be less valuable if inflation dropped, but not interest rates.

zxc123zxc123

If we're going to factor that then we should also factor in the other end of the scenario? TIPS will adjust too in the case of higher or lower inflation. TIPS won't protect the purchaser the way T-bonds would in the case of deflation, economic downturn, a stagnation environment, market crash, and/or any combination of those mentions. Often times those will happen in combination if not in combination plus in sequence: economic stagnation or market crash -> economic downturn -> deflation. I think at least for OP. This should answer his question well since most folks asking about Bonds vs TIPS on r/investing do so with the intention of adding them into portfolios as a mix/diversifier to stocks/indexes.

pigglesthepup

Interest rate risk. TLT is long duration. It excels during deflation, but vulnerable to inflation + rate hikes. Check out it's returns for 2022. Not saying you shouldn't have bought it. When rates are up is the best time to pick up long duration. 2008 is a great example of TIPS vs nominals and why it's a good idea to hold both: 1) [First half of 2008 was stagflationary](https://cpiinflationcalculator.com/2008-cpi-inflation-united-states/). GDP was going negative and unemployment rising as the economy was deteriorating, but CPI still rising. Primary culprit was gas prices. June 2008 is when a barrel of crude notched its all-time high of $140. Because TIPS are tied to CPI, they increase in value during such inflationary shocks. Investors were piling into TIPS, fearing a return of the 1970s. 2) Lehman was the largest holder of TIPS and when they filed for bankruptcy, they flooded the TIPS market to raise cash. TIPS' lower liquidity drove down their prices. Investors who had bought up TIPS fearing the 1970s were now underwater on a "safe" asset. 3) Lehman's collapse froze up credit markets. Yields on commercial paper spiked. Banks wouldn't lend to each other. The financial sector is the cardiovascular system of the economy. It stops pumping blood (money), the economy dies. CPI collapsed with Lehman because the economy was literally dying. Prices for everything collapsed. Gas went from over $5/gallon to just over $1 in less than six months. The Fed not only slashed short-term rates but bought up long duration bonds (TLT) to get yields down and boost bank balance sheets to get the blood (money) moving again. In sum: TIPS earn extra cash when prices are stupid and long duration nominals protect you when everything finally collapses.

Excaliblarg

Yeah that's a huge point too. If rates drop your regular Treasury becomes way more valuable since it's locked at 4.75%. The TIPS just adjusts down with inflation so you miss out on those capital gains. Fixed rate bonds can really pop when rates fall.

Good_Ride_2508

Why TIPS and SGOV instead of TLT? If I buy TLT ( which I did ), it gives better dividend and higher value when stocks are taking a hit like 2009 and 2020. What is the negative for TLT?

pigglesthepup

You're welcome. All that said, I don't think TIPS are bad but just misunderstood. Captain Chaos wants rates low to run it hot to inflate away the debt. This will leave us ripe for inflationary shocks: *unexpected* inflation. I'm personally switching my SGOV position over to short-duration TIPS (VTIP). Shorter duration minimizes some of the volatility of the above things I listed and buffers against rate hikes (VTIP was only -3% in 2022). However, I am *not* replacing my main holdings of nominals with TIPS.

saltyhasp

Keep in mind too, that TIPS in taxable accounts is a big questionable. There are cases where the cash payout might not even cover the taxes, so they are not always a cash flow generator.

DrXaos

One main risk now is political interference with calculation of honest CPI. TIPS are adjusted to whatever BLS says is CPI, not actual inflation.

MaybeTheDoctor

- TIPS (Treasury Inflation-Protected Securities) - long-term inflation protection - SGOV (an ultra-short-term Treasury ETF) - for capital preservation and liquidity They serve different purposes. I would rather ask, why TIPS and not TLT.

pigglesthepup

TIPS are tied to CPI. TIPS take a hit when CPI crashes. See: 2008. Nominal treasuries rise in value when rates collapse. See: 2008. TIPS have lower liquidity than nominal treasuries. See: 2008. TIPS are great for hedging *unexpected* inflation. Expected inflation in already priced into nominal yields.

AICHEngineer

As far as bond comparisons go for funding future consumption. It actually *is* a better idea for a retail investor who has much higher inflation risk to be buying TIPS rather than nominal long bonds if youre just buying the bond and holding to maturity. The large nominal bond market is useful for major intermediaries pricing assets on the margin who all tend to have nominal liabilities in the future, while our future liabilities are conpletely tied to inflation. There are some downsides, like a less liquid TIPS market.

WhileNotLurking

Because if rates drop, the value of the 4.75% treasury goes up much more than the TIPS that adjusted downward

New-Boysenberry5707

Your asset allocation logic makes a lot of sense especially increasing investments in healthcare, consumer staples, and Treasury Inflation-Protected Securities (TIPS) during periods of uncertainty. These sectors typically buffer well against market pullbacks. How do you usually decide when to revert to growth or cyclical stocks? I'd love to discuss this with you if you'd like.

Own-Character395

I looked at the sectors that went up and the ones that went down, not just today and yesterday, but in the last couple of gyrations. I consider this to be like tremors ahead of the big earth quake that is yet to come and by looking at the tremors you can figure out where the big rip will be. Previously by looking at past crashes I had allocated 4% each to a number of defensive sectors. As a result of the recent gyrations I I'm further over weighting healthcare, consumer staples, energy stocks (to 5% each), keeping my stake in REITS (still 4%) and reducing my stake in utilities and mining stocks (down from 4% to 3% each). I'm also gradually increasing my bond position, particularly in TIPS and, as they fall, in long bonds. Now up to 32% from 30% which itself is up from 20% six months ago. Rest is in broad market indexes, VTI and VXUS

PinkHydrogenFuture7

What would be an example of a specific macro environment that would call for TIPS ?

froandfear

Who is "someone"? Nobody here can answer without knowing your investment profile. Munis aren't going to be in the average investor's profile; they only make sense if your tax situation calls for them. TIPS are for very specific macro environments.

D74248

For a retail investor there is a world of difference between holding a typical open ended bond fund that buys/sells to maintain a duration and holding an actual investment grade bond to maturity. The former exposes you to interest rate risk and is a random walk through the interest rate forest. The latter exposes you to opportunity risk and is a slightly meandering walk to a known destination. The situation with TIPS in 2008 is an excellent example. TIPS are very sensitive to interest rate changes. But if you buy and hold the bond to maturity the zigging and zagging does not matter to you -- you know exactly where you are going to end up in real terms. On the other hand, holding a TIPS fund can be a wild ride with no clear destination. I suggesting taking a look at what a "bond ladder" is, and how it would work for you. The industry does a great disservice to retail investors by explaining how a bond works and then telling us to go and buy a bond fund.

D74248

This is not a binary decision. If you are 15 years out from retirement it might be a good idea to start building out a bond ladder. TIPS should be considered. Nominal Treasuries, TIPS, CDs, Preferred stock, closed end funds — these are all investment vehicles. Investing is not just about VOO and cash.

skobuffaloes

Put all my 401k money in money market TIPS or global securities two weeks ago. Maybe they saw that and decided it was over lol

DelphiTsar

Previous times Gold, but that's overvalued. Real Estate, which is overvalued and seeing a slump. IMHO the only thing that has any chance is bond market. The government will keep trying to prop up the market as much as it can by lowering rates. And trump will get a pick or two soon in the federal reserve. When they lower interest rates bonds go up in value. The risk with bond market is inflation eating the return(IMHO a small return is better than holding on to an obvious crash). If you are worried about bad inflation then TIPS, but I don't think the market has anymore room for crazy inflation. Companies aren't going to increase wages beyond what they are now. I haven't looked at commodity companies/etf's in a while, that doesn't really track the market, but I'm going to guess it's overvalued for what it is, but might be worth looking into. **TLDR, nothing is going to get you S&P500 historical returns but you might be able to hold semi where you are at and wait for the crash to rebalance.**

JonOwn1805

Thats interesting. "buy defined maturity TIPS ETFs" Could you give me some example of these type of funds ?

D74248

TIPS funds do not behave the way that investors often expect. They are very volatile and subject to interest rate risk. Better, IMO, to buy the actual bonds and hold to maturity OR buy defined maturity TIPS ETFs and hold them to liquidation.

Simple_Purple_4600

I bought 10k worth of TIPS but then again I'm 63

ikeepeatingandeating

Bonds are flat today, TIPS are slightly up. Depending on your allocation this week hasn't been that crazy. Week's been hard but hopefully it helps people will learn their true risk tolerances.

pigglesthepup

You want a **short-term** treasury fund. >TIP (iShares TIPS Bond ETF) Crashed hard in 2008 because CPI cratered and Lehman was the largest holder of TIPS at the time and dumped them all to raise cash. Also took a beating in 2022 from the rate hikes because intermediate duration (6 years). Both of these things are visible on TIP's full chart (why do people not look at charts?). A **short-term** TIPS fund like VTIP/STIP will have less volatility. VTIP/STIP returns have been better than BSV (nominal treasuries + investment grade corporates) in recent years because higher inflation. >AGG (iShares Core US Aggregate Bond ETF) Not short-term. Treasury holdings will keep it stable tho. Longer duration treasury funds have "crisis alpha" -- they *rise* in value during deflationary shocks. See the performance of TLT or EDV during 2008, Covid, or even this past April for an example. But they are not short-term. Only put in money you don't need for a long time.

Alone_Owl8485

The most cautious thing to do would be to move everything to an ETF with inflation protected treasuries (TIPS). You will not make big returns but you are also unlikely to lose much in a market downturn. https://etfdb.com/etfdb-category/inflation-protected-bonds/

21plankton

Hunker down with some TIPS and high yield savings accounts, stay put in the market and rotate industries as appropriate. Lower my expectations for growth and cut my spending, try not to buy a new car despite the good deals. Shop yard sales and secondary markets for needed items, rely on cheap hobbies and basic food products and a daily vitamin. Come to think of it I do a fair amount of this already. Clear out that second bedroom that ended up storage because some friend or family member will need it. I lived through the last major stagflation. So far this one is stagflation light but I expect it to get worse.

ErroneousEncounter

TIPS did not do well during the post-pandemic stagflation period. Consumer staples did sort of okay but fell off pretty fast. Same with commodities. Even value stocks drop during stagflation. But you can pick them up at a discount. Energy did the best IMO. Inflation raises energy prices and people have to pay for energy no matter what.

LongDarkTeeTime

I have my cash in VMFXX that is yielding 4ish%. Why not something like that instead of TIPS ( or VTIP ETF)?

Prospero_Ai

Good question. Stagflation is one of those scenarios where basically every traditional playbook falls apart because nothing really works cleanly. The textbook answer is commodities and energy, like you mentioned. Historically those have held up better when inflation stays high and growth stalls. The problem is timing matters a ton. Commodities can be incredibly volatile and if you're early or late by even a few months, you can get wrecked on the swings. Inflation-linked bonds (TIPS) sound good in theory but the real yields have been pretty terrible, and if we're talking true stagflation, you're essentially accepting negative real returns just to not lose as much as cash. Not exactly exciting. Here's what to focus on if stagflation started looking real: **1. Dividend aristocrats with pricing power.** Companies that can pass inflation onto customers and have maintained dividends through multiple recessions. Think boring stuff like utilities, consumer staples with strong brands. Not sexy, but they tend to survive better than growth stocks when everything's ugly. **2. Energy, but selectively.** Not just broad commodity exposure. Look for companies with strong balance sheets and consistent free cash flow. When growth slows, the leveraged players get crushed. **3. Gold.** Everyone rolls their eyes at gold bugs, but in a stagflation environment where real rates are negative and trust in monetary policy is shaky, gold historically does its job as a store of value, we are seeing this play out already this year. **4. Short duration bonds.** If you need fixed income exposure, keep duration short. Long bonds get destroyed in persistent inflation. The harder question is how do you actually know stagflation is starting versus just a rough patch? That's where watching what big money is doing matters. The honest answer is there's no perfect playbook here. Stagflation is brutal because it's a lose-slow scenario across most asset classes. Your goal isn't to win, it's to lose less than everyone else while staying liquid enough to deploy capital when things eventually turn.

watch-nerd

TIPS

No-Associate-6068

You nailed the core playbook. It's all about rotating into real assets and things with pricing power. * Energy/Commodities: Absolutely. You're owning the source of the inflation. Gold is the classic "fear" trade. * "Boring" Value Stocks: I'd look hard at consumer staples (people still buy soap), healthcare, and utilities. Companies that can raise prices and not lose customers. High-growth tech with no profits gets wrecked. * Bonds: TIPS (inflation-linked) are literally designed for this. I'd avoid long-duration bonds like the plague. * Cash: Holding excess cash is just a guaranteed loss of purchasing power.

wjonagan

Yep, Real assets and TIPS have historically been the best defense. I've been slowly shifting some allocation that direction without going overboard. Keeping dry powder for opportunities is underrated advice too, stagflation markets tend to be choppy as hell.

pnw-techie

What historical period had stagflation and also had TIPS?

W_Malinowski

gold first, then energy when things seem like they're going to start improving. would never buy TIPS because the yield is tied to cpi as far as i know, which obviously doesn't reflect the real decline in purchasing power.

Deep_Luck-

Stagflation’s tricky because there’s no clean “win.” Historically, the stuff that tends to hold up best is real assets (commodities/energy), TIPS or other inflation-linked bonds, and strong-cash-flow/value stocks. I wouldn’t panic-rotate everything, though, usually the smart move is staying diversified, upping exposure to inflation-hedges gradually, and keeping some liquidity for volatility.

kiwimancy

Similar, yes. Both are linked to CPI. Series I savings bonds are non-marketable, redeemable at par after 5 years (or with a 3 month interest penalty after 1 year), and have a yearly buying limit of $10k per tax id per year plus 10k more on paper with enough of a tax refund. Rates are set twice a year on a lag compared to TIPS. TIPS are a marketable security that one can buy by the billions if desired.

Immediate-Check7803

I took out all my holdings in companies that donated to destroying the East Wing and put it in TIPS. Now I am rooting for DOG.

MetricT

The best proxy for gold is usually gold miner stocks. For small increase/decrease in gold price, gold miner stocks tend to increase/decrease by ~1.5x. For larger increase in gold price, that's not necessarily true. Gold is getting harder to find, more expensive to refine, so a doubling in gold prices doesn't necessarily translate into a doubling of gold miner stock prices. I should add that, while I rode FSAGX (gold miner fund) to a > 100% return since January, I suspect the "easy money" is gone, so I'm rotating to other assets like TIPS. I'd wait for a crash before piling back in.

neurapathy

TIPS?  Pardon my ignorance.