Curmudgeon
Recycles dryer sheets
- Joined
- Oct 17, 2016
- Messages
- 255
I use FutureAdvisor and SigFig to analyze my portfolio and summarize any shortcomings/issues. I don't necessarily accept everything they say, but it's an easy way to analyze a portfolio and get some quick feedback.
One of the things both of them have been telling me is that I should have ~20% of my portfolio in TIPS. So, I am considering establishing a 10-year ladder in my tax-deferred account, with one set maturing each year. YTM on the shortest-term TIPS runs a tenth or two of a percent, while the 10-year maturities run a bit above 0.4%. Breakeven yield seems to be running about 2% right now, meaning that if inflation over the next 1-10 years runs higher than 2%, I'd come out ahead on investing in TIPS vs nominal bonds. These all have pretty small coupons - generally 1/8% - so they wouldn't generate any meaningful income, but with 2% of my portfolio maturing every year at an inflation-adjusted payout, these should generate about half or more of my spending needs each year if I need to dip into them. By holding to maturity, I'm immune to interest rate risk.
Any thoughts or feedback? Is putting 20% into TIPS a reasonable move? Any reason to go with a shorter, or longer, set of maturities (i.e. a 5-year or 20-year ladder)?
One of the things both of them have been telling me is that I should have ~20% of my portfolio in TIPS. So, I am considering establishing a 10-year ladder in my tax-deferred account, with one set maturing each year. YTM on the shortest-term TIPS runs a tenth or two of a percent, while the 10-year maturities run a bit above 0.4%. Breakeven yield seems to be running about 2% right now, meaning that if inflation over the next 1-10 years runs higher than 2%, I'd come out ahead on investing in TIPS vs nominal bonds. These all have pretty small coupons - generally 1/8% - so they wouldn't generate any meaningful income, but with 2% of my portfolio maturing every year at an inflation-adjusted payout, these should generate about half or more of my spending needs each year if I need to dip into them. By holding to maturity, I'm immune to interest rate risk.
Any thoughts or feedback? Is putting 20% into TIPS a reasonable move? Any reason to go with a shorter, or longer, set of maturities (i.e. a 5-year or 20-year ladder)?