Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Hedging Inflation - TIPs/REITs/Commodities
Old 08-02-2006, 10:04 AM   #1
Confused about dryer sheets
 
Join Date: Aug 2006
Posts: 4
Hedging Inflation - TIPs/REITs/Commodities

I was looking to add commodities to my allocation, though all of commodity funds I found have absurdly high fees/expense ratios. So, I was thinking about just increasing my allocation to TIPs. I would think that the two correlate pretty highly in the long-run.

I think that holding REITs, Commodities, and TIPs are an attempt to hedge inflation. What are the added benefits to holding REITs vs Commodities vs TIPs? Diversification? REITs and TIPs pay out a current income stream and Commodities do not. I think that people like the idea of investing in tangible assets as well.

Any thoughts on this?
aw78 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Hedging Inflation - TIPs/REITs/Commodities
Old 08-02-2006, 10:13 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2003
Posts: 18,085
Re: Hedging Inflation - TIPs/REITs/Commodities

There's lots of research out there to peruse, but I note that DJP is a new, lower cost alternative that is also tax efficient. There is also now an ishares commodity fund, GSG, but it tracks the Goldman index rather than the DJ-AIG index.
__________________
"All animals are equal, but some animals are more equal than others."

- George Orwell

Ezekiel 23:20
brewer12345 is offline   Reply With Quote
Re: Hedging Inflation - TIPs/REITs/Commodities
Old 08-02-2006, 06:07 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 6,115
Re: Hedging Inflation - TIPs/REITs/Commodities

i bought gsg 2 days ago.............for a conservative approach fidelity strategic real return is not bad,,,roughly equal splits between commodities,tips,reits and floating rate loans
mathjak107 is offline   Reply With Quote
Re: Hedging Inflation - TIPs/REITs/Commodities
Old 08-02-2006, 11:33 PM   #4
Thinks s/he gets paid by the post
Spanky's Avatar
 
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,455
Re: Hedging Inflation - TIPs/REITs/Commodities

GSG holds 75% energy - essentially an energy fund. Expense ratio of 0.75% is quite reasonable.
__________________
May we live in peace and harmony and be free from all human sufferings.
Spanky is offline   Reply With Quote
Re: Hedging Inflation - TIPs/REITs/Commodities
Old 08-03-2006, 02:56 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 6,115
Re: Hedging Inflation - TIPs/REITs/Commodities

gsg is interesting..it weights by world production and importance...right now energy is about 75%....the rest is made up of very diverse commodities,especially when compared to the narrow index of dbc....
mathjak107 is offline   Reply With Quote
Re: Hedging Inflation - TIPs/REITs/Commodities
Old 08-03-2006, 05:47 AM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2003
Posts: 18,085
Re: Hedging Inflation - TIPs/REITs/Commodities

Quote:
Originally Posted by mathjak107
gsg is interesting..it weights by world production and importance...right now energy is about 75%....the rest is made up of very diverse commodities,especially when compared to the narrow index of dbc....
I prefer the more diversified DJ-AIG ndex to the goldman index. It is more broadly weighted wthout the huge bet on energy. But in truth, both indexes are fairly highly correlated with energy prices.
__________________
"All animals are equal, but some animals are more equal than others."

- George Orwell

Ezekiel 23:20
brewer12345 is offline   Reply With Quote
Re: Hedging Inflation - TIPs/REITs/Commodities
Old 08-04-2006, 01:37 AM   #7
Recycles dryer sheets
 
Join Date: Nov 2005
Posts: 355
Re: Hedging Inflation - TIPs/REITs/Commodities

aw78--Last year, Scott Burns reviewed a report on inflation. There are multiple causes/types, with different hedges for each. TIPS work somewhat(gov't determines inflation rate), commodities work against sudden inflation from shortages of natural resources, and a higher equity allocation helps since businesses can pass through inflation triggered rate increases(in theory). Can't find it now, so no link.
Joe
heyyou is offline   Reply With Quote
Re: Hedging Inflation - TIPs/REITs/Commodities
Old 08-04-2006, 06:47 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2003
Location: Kansas City
Posts: 7,968
Re: Hedging Inflation - TIPs/REITs/Commodities

Hmmm

For the dedicated slice and dicers - a read over at Raddr's research section on ScV and Commodities and EAFE even might prove useful to some - depending on how you have your portfolio structured - PCRIX is featured as a way of doing commodities.

Interesting stuff.

heh heh heh
unclemick is offline   Reply With Quote
Re: Hedging Inflation - TIPs/REITs/Commodities
Old 08-06-2006, 09:58 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Re: Hedging Inflation - TIPs/REITs/Commodities

Quote:
Originally Posted by aw78
I was looking to add commodities to my allocation, though all of commodity funds I found have absurdly high fees/expense ratios. So, I was thinking about just increasing my allocation to TIPs. I would think that the two correlate pretty highly in the long-run.

Any thoughts on this?
With Vanguard Inflation Protected Securities fund yielding about 2.3%, TIPS seem to be on the "rich side of fairly valued" relative to plain old treasuries. That is to say they are slightly expensive IMO, but not dramatically so. I think at current levels TIPS can be used to diversify a healthy portion of your bond portfolio. I, however, wouldn't add them as a substitution for equities.

Commodities are probably a good portfolio diversifier but have already had an amazing run. I'm always loath to buy anything that that has the "flavor of the month" feel that commodities do right now. I'm more than happy to sit on the sidelines watching all the "smart money" clean up in commodities. When and if they fall back to reasonable levels (and are once again out of favor) I'll probably add 5% or so to the portfolio.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Inflation and market performance Rich_by_the_Bay FIRECalc support 6 07-08-2006 05:56 AM
Panama Inflation Arif FIRE and Money 7 04-19-2006 07:39 AM
Controlling Inflation: The Taylor Principle wabmester FIRE and Money 19 10-11-2005 09:44 PM
Go with TIPs or am I crazy? Mister Bill FIRE and Money 147 06-14-2005 09:25 AM
Retiree Inflation Rate? mccl FIRE and Money 4 05-13-2004 07:51 AM

» Quick Links

 
All times are GMT -6. The time now is 02:54 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.