Swap VIPSX for VWEHX OR VWAHX???

[two4theroad]

I am rebalancing and shuffling for tax loss harvesting. (hopefully before the big run up!!)
With all the headlines about recession and low inflation for the next few years my VIPSX (TIPS fund) is looking really sad. My last two pay outs from it were truly pathetic, any worse and I would have to send money in.....
I am thinking about swapping it out for either Hi Yield Corp VWEHX or Hi Yield Tax Exempt VWAHX for awhile and getting back into it when inflation seems truly threatening. It is within an IRA but am thinking about the tax exempt fund because of the 1 year holding penalty on the HYCorp.
What is negative about this scenario other than a feeble attempt at market timing? I just can't see keeping a large chunk of TIPS fund with absolutely NO return.
Also have some new cash in after tax to invest....any ideas?
2fer

 

[ziggy29]

I am rebalancing and shuffling for tax loss harvesting. (hopefully before the big run up!!)
With all the headlines about recession and low inflation for the next few years my VIPSX (TIPS fund) is looking really sad. My last two pay outs from it were truly pathetic, any worse and I would have to send money in.....

...

What is negative about this scenario other than a feeble attempt at market timing? I just can't see keeping a large chunk of TIPS fund with absolutely NO return.

Well, are you investing for income or for long-term inflation protection? Keep in mind that VIPSX has had a nice run-up in NAV even as its income component has shrunk. So it's doing its job in terms of keeping up with inflation and then some, but for current income a TIPS *fund* is not reliable for income in low/no/negative inflation scenarios -- but individual TIPS are. (They may temporarily lose market value, but will at least return par at maturity.)

It's important for investors to remember that what really matters in the end is REAL return. In a deflationary environment, zero nominal return is a positive real return. These are unusual times (and unprecedented in most of our lifetimes), and it challenges our mindset when we see something returning a nominal 0-1%. But in *real* terms it's still doing what it was intended to do. But in a fund, the income component may decline to next to nothing in such a period, so a TIPS fund can't be relied on for those who need current income (but individual TIPS can).

 

[Grep]

What is negative about this scenario other than a feeble attempt at market timing?

This thread belongs in the Individual Stock Picking category.

Yes, it's (an attempt at) market timing. Rather than flail about making random and rather drastic swaps (TIPs to High Yield?!?) for the sake of short-term concerns, why don't you take your time to think about your long term strategy, settle on that, and stick with it.

 

[RustyShackleford]

Rather than flail about making random and rather drastic swaps (TIPs to High Yield?!?) for the sake of short-term concerns, why don't you take your time to think about your long term strategy, settle on that, and stick with it.

Mr OP, Grep's words could have been more tactfully phrased, but they
are wise ones.

 

[dshibb]

So your going to dump a fund that is guaranteed to appreciate in an inflationary environment and replace it with one that is guaranteed to depreciated in an inflationary environment? And inflation is expected in less than a year and a half.

I hope it works out for you.

 

[Dennis]

Well. Unless your Portfolio has made at least 8% apy for the past 10 yrs?
Lost Less than -18% in 2008?

Then I'd suggest you put 75% if not more into 2-3 Balanced Funds..Until I did in 99', I was Performance Chasing all over the place in the previous 15 yrs..and not getting anywhere..

At the Min.? Put it in VWELX or VWINX funds.. and you might not Loose too much $ by the time you will need it..

 

[two4theroad]

Thanks for the input. The TIPS stayed! I was just stricken when I looked at the most recent payout and had a minor derailment. I knew ya'll would get me back on track.

 

[Lawrence of Suburbia]

I thought VIPSX was yielding 5.4% or so? Why ditch it?