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Old 12-30-2008, 02:47 PM   #21
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Let's play nice, kids.

I don't necessarily disagree with what our ivory tower eggheads have to say, at least some of it. But they ignore the cardinal rule of all investment planning: if your chosen plan cannot meet your objectives, it isn't a reasonable investment allocation. I don't know about the rest of you, but a portfolio of all TIPS would never allow me to meet my goals. I suspect that is the case for most people. So its very nice that one can get a good risk-adjusted return with TIPS, but its largely irrelevant as I don't wish to work until I am 70.
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Old 12-30-2008, 02:49 PM   #22
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FD,

Bodie's been saying to use TIPS to ensure a minimum standard of living in retirement since at least 2001. People were listening in 2001 + 2002, ignoring in 2003-2007, and are now paying attention again.
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Old 12-30-2008, 02:59 PM   #23
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Old 12-30-2008, 05:29 PM   #24
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What Brewer said.

Just curious. Has anyone looked at the yield of a ladder of TIPS and their re-invested interest, progressively purchased over a career-length of time? Yes, you will have to extrapolate the short data set.

TIPS are gov't bonds. They pay only a little real yield. You won't get much return from low risk investments. I second the remark about having to work until age 70 in order to retire on a portfolio of 100% gov't bonds. I've seen articles that suggested 2% plus inflation as a SWR for an all bond portfolio.
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Old 12-30-2008, 08:47 PM   #25
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What Brewer said.

Just curious. Has anyone looked at the yield of a ladder of TIPS and their re-invested interest, progressively purchased over a career-length of time? Yes, you will have to extrapolate the short data set.

TIPS are gov't bonds. They pay only a little real yield. You won't get much return from low risk investments. I second the remark about having to work until age 70 in order to retire on a portfolio of 100% gov't bonds. I've seen articles that suggested 2% plus inflation as a SWR for an all bond portfolio.
No one is saying that you have to be 100% TIPS. Just have enough TIPS to guarantee that you can still eat, heat your house, and whatever else you cannot live without. Those are the dollars I wouldn't be willing to invest in any risky asset, no matter the probability of higher returns. If my risky assets do well, I can raise my standard of living. If my risky assets don't do well, I don't have to lower it.
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Old 12-31-2008, 08:36 PM   #26
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See also The Future of Life-Cycle Saving & Investing conference in 2006 at BU, which included two articles/papers by Bodie and Kotlikoff:

The Theory of Life-Cycle Saving and Investing
Thanks for the link. I read this one and thought it had some interesting insights - specifically decomposing stocks into an risk free time shift and a risky outcome.
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