TIPs and young dreamers

[wildcat]

Question:
Should young dreamers really hold TIPs are part of their fixed income allocation?

Theory:
Suppose this group is working and on average we receive raises of at least inflation: say 3-4%. Some years, we do better (say if you job hop) and some years we get the standard 3-4% (say if you stay at a position, same company).

TIPs provide us with a fixed return, for example Vanguard's TIPs Fund is currently yielding 2.56%, and a variable return based on inflation. This probably sounds like a reasonable deal if you are not working and have accumulated a large enough portfolio where you can be risk averse. What about the flip side for a young person with a small portfolio & still accumulating wealth a little a time?

Suppose this young dreamer holds a portfolio without fixed income or has a small portion of it allocated to non-inflation based fixed income. The portfolio - mostly due to dividends - yields 2.5% or so. The person has a steady job that usually covers the effects of inflation via raises.

If a young dreamer can cover inflation, hold a diversified portfolio that yields apprx. the same as say TIPs & has a steady income (kind of by my theory, the fixed portion) from employment, are TIPs a good idea to hold for this person?

I kind of question the value of TIPs for this crowd but please provide input.