TIPS (Treasury type TIPS)

[gooddog]

A question to the TIPS investors on the forum. What is the best/least difficult way to invest in TIPS, while considering associated costs of buying/selling. May be selling a house on the beach in California, and TIPS would probably be a wise place to park the $$. Of course, open to any suggestions besides TIPS. (note - I have a Schwab account if that is helpful or not)...



Thanks!

 

[daylatedollarshort]

TIPS rates are pretty low right now, generally below inflation rates, so personally I am holding off adding any new issues myself. The shortest maturity is 5 years on new issues. When I do buy them I usually buy new issues through Fidelity at auction times. If you sign up for Fidelity new issue offering alerts, they will tell you when the TIPS auctions are coming up about a week ahead of time. The alerts have the expected yield, which may change based on demand, but usually end up being pretty close to Fidelity's estimates. If you place your own order with Fidelity via their online system, they do not charge a fee on new issues bought at auction. There is a small service charge for representative assisted purchases.

You can also buy and sell TIPS on the secondary market. The current offerings are listed on Fidelity's fixed income offerings page near where the CD offerings are published.

 

[Dash man]

I recently put some money into corporate and taxable municipal bonds in the form of an intermediate term bond ladder. The bond analyst I spoke to at Schwab didn’t recommend tax exempt municipal bonds or TIPS, saying they are way overpriced. Corporate and taxable municipal bonds have a better, though not great, return. But if interest rates go up, as the closer to maturity bonds are sold, the funds will be invested into (hopefully) higher yielding bonds. It’s too soon to tell if they are correct, but so far so good.

 

[Closet_Gamer]

I keep 5% of my AA in TIPS via the SCHP ETF.

I know there is a school of thought that TIPS is more of a "Go big or Go home" investment, but I few inflation protection like just about anything else in life. Do it slowly, consistently and over the long term. It creates one more rebalancing variable as well.

 

[ksr]

You may already know this, but if you are going to buy TIPs bonds (as opposed to ETFs), you're better off holding them in a retirement account than a taxable account. They accumulate a "phantom" income that doesn't pay out until the bond matures, but you are taxed on that income each year if held in a taxable account.

The ETFs actually pay out that income so at least you are receiving what you're taxed on each year.

Also, if you are interested in buying bonds, you might find this tentative schedule helpful: https://www.treasury.gov/resource-c...er/quarterly-refunding/documents/auctions.pdf

 

[tsoispf]

The iShares TIPS Bond ETF (TIP) has treated me well for the past several months when compared to the iShares Core U.S. Aggregate Bond ETF (AGG) where I would normally be holding bonds.

 

[gooddog]

Thanks for the heads up on the tax situation with these. Will be in a taxable account, so ETF it is. Might look at an alternative. Appreciate the info.

 

[Lsbcal]

A question to the TIPS investors on the forum. What is the best/least difficult way to invest in TIPS, while considering associated costs of buying/selling. May be selling a house on the beach in California, and TIPS would probably be a wise place to park the $$. Of course, open to any suggestions besides TIPS. (note - I have a Schwab account if that is helpful or not)...



Thanks!

Bonds are kind of risky now I think. If you look at real rates they are negative: https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield

I would go with value stocks which may keep moving up as economy reopens. But you will have to accept the risk. The only choice for governments right now is to run hot economies.

 

[daylatedollarshort]

One thing to keep in mind is that TIPS funds and TIPS bonds have different characteristics. TIPS bond funds never mature, so you are not guaranteed of receiving your principal back, plus they have added fees tacked on. Pros and cons are listed here - TIPS Mutual Funds - Pros and Cons (thebalance.com)

 

[VanWinkle]

Bonds are kind of risky now I think. If you look at real rates they are negative: https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield

I would go with value stocks which may keep moving up as economy reopens. But you will have to accept the risk. The only choice for governments right now is to run hot economies.

So forget bonds and put it all in the stock market? That sounds a little dangerous to me. Bonds are for ballast, not returns- especially government bonds. If you want 100% stocks in retirement, you better be ok with losing 50% of your portfolio in a major bear.

 

[Lsbcal]

So forget bonds and put it all in the stock market? That sounds a little dangerous to me. Bonds are for ballast, not returns- especially government bonds. If you want 100% stocks in retirement, you better be ok with losing 50% of your portfolio in a major bear.

I didn't say put 100% in stocks.

 

[VanWinkle]

I didn't say put 100% in stocks.

My apologies then, but bonds to value stocks sounded like going all equities. My mistake.

 

[Math]

Vanguard has a short term TIPS etf, VTIP. It has gone up recently. You can watch it and get in on a downturn, I did.