rollergrrl
Recycles dryer sheets
- Joined
- May 19, 2017
- Messages
- 69
What are your thoughts on investing in T-bills, Notes, TIPS, FRNs and saving bonds?
Absolutely true. But you are still better off with TIPS in a high-inflation environment than you would be without inflation protection. The glass is definitely half-full IMO.TIPS are inflation insurance. I dislike that their rate is whatever rate the government declares as official, rather than what my inflation rate is. Should I need lots of health care, and health care is inflating at a 10% rate when TIPS are paying 4% I'm losing ground.
Absolutely true. But you are still better off with TIPS in a high-inflation environment than you would be without inflation protection. The glass is definitely half-full IMO.
The inflation adjustment from TIPS is taxable ordinary income, so in most cases after tax, it will always lose real purchasing power. It’s attractive for a pension fund that is not concerned about tax, but not really for individuals. There is no asset or investment that is guaranteed to hold after tax real value, but a portfolio with at least 35% - 40% equities comes closest.
Actually, I think the opposite. The federal government is already the biggest health care customer and they have plenty of medicare and medicaid experience telling vendors what they will be paid. As costs continue to rise, this hammer will be used more and more. Consider the jungle drums in Washington now indicating that drug companies' profits may be on the chopping block. If not this year, soon. So I would be avoiding health care, not investing in it.In the specific example, which is one we all face with some chance, I would hope a health care fund would track inflation better than TIPS.
Well, boats come in various sizes. In our case we have serious six figures in our TIPS insurance policy. But I think it's a "Some is good, more is better." situation. People with less money probably have a greater need for inflation insurance as one big wave could sink a small boat.How much inflation protection do you really get from a a small allocation TIPS anyway? Seems like you would have to have a boatload to cover much of your expenses in a 70s scenario.
True enough, the bold print giveth and the fine print taketh away. We hold our TIPS in tax-sheltered accounts, which is a bit of a help. I don't think the tax argument leads to a conclusion that they are only for pension funds, though.The inflation adjustment from TIPS is taxable ordinary income, so in most cases after tax, it will always lose real purchasing power. It’s attractive for a pension fund that is not concerned about tax, but not really for individuals. .
With respect, you don't know that. All you can say is that such a portfolio backtests well. The 70s and 80s were a very different time. Unions and inflation-indexed wages were much bigger factors. Also, the problem was more or less home-made though triggered by oil prices. Hence wage and price controls.There is no asset or investment that is guaranteed to hold after tax real value, but a portfolio with at least 35% - 40% equities comes closest.
Additional complexity? I just call the Schwab bond desk and tell the nice man how many bonds I want to buy on the next auction and it's done. If he's feeling generous (usually) he waives the $25 fee.And it seems one would have to have the additional complexity of buying the TIPS directly from the FED. I looked at a few TIPS funds and they are basically yielding zero so they have already been bid up in price.
Lately I have been buying floating rate treasuries at auction. They are 2 year maturity and pay quarterly interest that is an average of the last quarter's 90 day t bill rates. Not very exciting, but it doesn't get lower risk.
So about 1.45-1.50% currently?
Silly question, but what is the advantage of them over buying (and rolling) 90 day treasuries?