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Did I make the right investment choice?
Old 03-04-2011, 07:20 AM   #1
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Did I make the right investment choice?

"Information overload" has me dizzy. I'll leave out bloody details to be brief, but I need some advice:
I plan to retire in 1-2 years, my wife another 4-5. We have an extra $600/month or so, right now, that we were parking in [after-tax] savings account. We just increased my wife's 403B contribution by that $600/month. Since the $600 originally went into conservative, we opted for Vanguard TIPS fund.
Was that the right call? Money markets pay too small a return, so I wanted at least a little better return and still be safe. First couple of years of my retirement (before I get SS) we may need to draw down on some CD's and *possibly* this money.
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Old 03-04-2011, 08:22 AM   #2
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I think you need to decide in context of the big picture plan, which should consist of a desired asset allocation and some kind of written investment policy. Otherwise you are jumping around and market timing. Bogleheads has some simple but important advice.

Asset Allocation - Bogleheads

Investment Policy Statement - Bogleheads
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Old 03-04-2011, 08:51 AM   #3
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I would probably have gone with CDs, or possibly a short-term bond fund. Haven't looked, but I'd imagine the TIPS fund has lots of intermediate to long term bonds, making it more interest rate sensitive. YMMV...
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Old 03-04-2011, 10:17 AM   #4
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Bill Gross just put out this month's Outlook, see PIMCO | Investment Outlook - Two-Bits, Four-Bits, Six-Bits, a Dollar

He thinks the 10 year Treasury is too low by about 1.5% and mentions the 5 year TIPS negative rate in that context. Personally, I would not bet against Gross -- he knows bonds.

IMO, buying into the VG TIPS fund right now is kind of a bet against real rates going up towards historic levels. I'd stay in short term investment grade or maybe even in Gross's Total Return fund. I'm sure others will disagree. Time will tell. You probably will not be too badly hurt should rates go up and you hold the fund for more then its average duration. Just be willing to stay the course.
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Old 03-04-2011, 10:33 AM   #5
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More "information overload":

You did OK. However, the Vanguard TIPS fund is not safe. It is a bond fund. It can lose money. It dropped by 10% in value a few times in the past. I would not call it conservative. No one can predict the future.
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Old 03-04-2011, 10:54 AM   #6
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Quote:
Originally Posted by travelover View Post
I think you need to decide in context of the big picture plan, which should consist of a desired asset allocation and some kind of written investment policy. Otherwise you are jumping around and market timing. Bogleheads has some simple but important advice.

Asset Allocation - Bogleheads

Investment Policy Statement - Bogleheads
What he said.
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Old 03-04-2011, 11:20 AM   #7
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Thanks, all. I reversed course. I do think TIPS Fund has a place in my portfolio, but not yet, and not for that $600 "extra" per month. We opted for the Short Term Federal Funds.

Thanks again; now I can sleep at night and stop obsessing.....
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