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Anyone buying TIPS?
Old 02-26-2012, 11:58 AM   #1
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Anyone buying TIPS?

Long term CD matured. Getting ready to re-invest. I'm considering VAIPX. Is anyone out there buying TIPS right now? They've had a big run up. Not sure if buying now is wise. Any thoughts?
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Old 02-26-2012, 12:09 PM   #2
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Long term CD matured. Getting ready to re-invest. I'm considering VAIPX. Is anyone out there buying TIPS right now? They've had a big run up. Not sure if buying now is wise. Any thoughts?
First, before you consider TIPS, get a good book like the one written by financebuff, and be sure you really understand how they work and how they are priced.

Next, don't buy TIPS until your chances of gaining are at least as large as your chances of losing capital prior to maturity. With some shorter duration TIPS, at their present prices you lock in a real loss to maturity the day you buy. For example, 10 year and shorter TIPS have a negative real yield. Even 30 years out your real yield will be < 1%.

Ha
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Old 02-26-2012, 03:56 PM   #3
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Are the CDs in IRA? If so you may want to consider buying the TIPs directly. As low as Vanguards expenses (.11%) are the absurdly low rates for TIPs means you are making very little money.

When I bought TIPs and IBonds in 2000/2001 with real yields between 3.5 and 4% they were good deals At 2-2.5% they are probably ok, but it does make it difficult to achieve a 4% SWR. At the current 0-.75% rate I don't see how can one afford to have SWR rates much above 2.5% if say 50% of your money is TIPs with 30 year at .75%.

Let's put it this way there is no way the returns of VAIPX going forward are going to match the last 3 years.
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Old 02-26-2012, 05:00 PM   #4
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Pentagon credit union has rates on CDs like 5yr at 2.3% you might want to consider that also.
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Old 02-26-2012, 05:29 PM   #5
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Long term CD matured. Getting ready to re-invest. I'm considering VAIPX. Is anyone out there buying TIPS right now? They've had a big run up. Not sure if buying now is wise. Any thoughts?
Only in our ROTH but VIPSX is more our speed since I'm reluctant to part with 50K in one shot. If inflation heats up I suspect it might do better than a TGCFX type fund.
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Old 02-27-2012, 08:33 PM   #6
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Only in our ROTH but VIPSX is more our speed since I'm reluctant to part with 50K in one shot. If inflation heats up I suspect it might do better than a TGCFX type fund.
.?.? How can VIPSX hold notes paying 2% yet go up over 10% in a year. That looks like it is in for a tumble....please explain...I do not understand? It looks to me that those are some pretty popular notes.

Bob
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Old 02-28-2012, 05:23 AM   #7
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.?.? How can VIPSX hold notes paying 2% yet go up over 10% in a year. That looks like it is in for a tumble....please explain...I do not understand? It looks to me that those are some pretty popular notes.

Bob
Inflation expectations? Divvy in 2011 was about 45.
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