Question: Looking for recommendations of 2 or 3 really good posts about inflation protecting your portfolio since I've been dormant on this site for a while....
Background:I was somewhat active on this site a few years ago, when I developed my IPS (very similar to many of yours with just 3 ETF, rebalance bands, etc). I implemented and stuck to my IPS which really just ran on autopilot (I keep putting $ in, rarely take it out), and the assets have grown. Since things were on autopilot, I spent less time working on investing topics (studying different stocks, looking at predictions, ....) and more time doing things I like (yeah! more time with kids, sports, etc). My portfolio just kept doing it's thing in the background, per my IPS, and I haven't intervened during market turmoil (good, right?). I do usually take a look at my portfolio towards year end which I am doing now for gifting and other purposes, and I am also pondering the impact of taxes and inflation. I'll table tax topic and just focus on inflation. I suspect my bonds are not going aren't going to fare well versus inflation, and I now I am thinking I need to do some quick reading catchup of some great posts on this site regarding inflation. I did a search and tons and tons of things show up from i-bond discussions to stay-the-course.......I was hoping maybe someone could points two or three great posts about inflation that could "jump start" / refresh my memory so that I can see if I properly contemplated inflation during my original IPS development.
Suggestion for BH posts on Inflation?
Re: Suggestion for BH posts on Inflation?
This thread is now in the Personal Investments forum (help with personal investments, specifically the Investment policy statement.Carbonate24 wrote: ↑Sat Dec 04, 2021 1:57 pm I was hoping maybe someone could points two or three great posts about inflation that could "jump start" / refresh my memory so that I can see if I properly contemplated inflation during my original IPS development.
Re: Suggestion for BH posts on Inflation?
There have been a lot of posts on inflation here lately. However go 2 years back and if you brought up the prospect of inflation you may have been laughed at. Most just dismissed as a remnant of history.
There are different schools of thought on your portfolio and inflation.
1. One school is you don't change anything. Long term things should even out.
2. One school is increase stocks and decrease conventional bonds, under the theory that stocks should appreciate with inflation.
3. Other schools have various tweaks to partially protect agsinst inflation. Any of the following may or may not materially protect agsinst inflation. Ibonds (will keep up with inflation, less long term tax impacts), TIPS (will mostly keep up with inflation but long term negative real yield andong term tax impacts), value/small cap value (have tended to historically fare better vs inflation vs large cap growth), international (held up better in 70s inflation, may or may not help in future inflations), real assets (homes, REITS, gold, commodities- these are kind of hit and miss and may or may not provide inflation protection but typically have more modest long term real returns)
When discussing inflation you have at least 2 components, the first part is rising inflation, where inflation may rise above interest rates. Many assets, apart from conventional bonds, may do well as increasing money supply pushes all of these asset classes upward. The second part of inflation is if and when it doesn't die off on its own and govt/fed steps in to stop it, usually by raising interest rates. This is typically hard on both stocks and bonds.
Building a portfolio to protect agsinst inflation can simplistically be a trade off. You may choose to devote a portion of your portfolio to inflation sensitive assets, but many of these assets tend to be less lucrative in the very long term.
In my case I buy as much ibonds as I can, devote a portion of bond portfolio to TIPS, market weight international stocks, and have modest tilts to small cap value, plus a small smattering of REITS, gold and silver. That may provide some protection. But it will cost you when interest rates and inflation are near zero and FAANG stocks are going up 25% a year.
There are different schools of thought on your portfolio and inflation.
1. One school is you don't change anything. Long term things should even out.
2. One school is increase stocks and decrease conventional bonds, under the theory that stocks should appreciate with inflation.
3. Other schools have various tweaks to partially protect agsinst inflation. Any of the following may or may not materially protect agsinst inflation. Ibonds (will keep up with inflation, less long term tax impacts), TIPS (will mostly keep up with inflation but long term negative real yield andong term tax impacts), value/small cap value (have tended to historically fare better vs inflation vs large cap growth), international (held up better in 70s inflation, may or may not help in future inflations), real assets (homes, REITS, gold, commodities- these are kind of hit and miss and may or may not provide inflation protection but typically have more modest long term real returns)
When discussing inflation you have at least 2 components, the first part is rising inflation, where inflation may rise above interest rates. Many assets, apart from conventional bonds, may do well as increasing money supply pushes all of these asset classes upward. The second part of inflation is if and when it doesn't die off on its own and govt/fed steps in to stop it, usually by raising interest rates. This is typically hard on both stocks and bonds.
Building a portfolio to protect agsinst inflation can simplistically be a trade off. You may choose to devote a portion of your portfolio to inflation sensitive assets, but many of these assets tend to be less lucrative in the very long term.
In my case I buy as much ibonds as I can, devote a portion of bond portfolio to TIPS, market weight international stocks, and have modest tilts to small cap value, plus a small smattering of REITS, gold and silver. That may provide some protection. But it will cost you when interest rates and inflation are near zero and FAANG stocks are going up 25% a year.
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Re: Suggestion for BH posts on Inflation?
Great points.JBTX wrote: ↑Sun Dec 05, 2021 12:38 am There have been a lot of posts on inflation here lately. However go 2 years back and if you brought up the prospect of inflation you may have been laughed at. Most just dismissed as a remnant of history.
There are different schools of thought on your portfolio and inflation.
1. One school is you don't change anything. Long term things should even out.
2. One school is increase stocks and decrease conventional bonds, under the theory that stocks should appreciate with inflation.
3. Other schools have various tweaks to partially protect agsinst inflation. Any of the following may or may not materially protect agsinst inflation. Ibonds (will keep up with inflation, less long term tax impacts), TIPS (will mostly keep up with inflation but long term negative real yield andong term tax impacts), value/small cap value (have tended to historically fare better vs inflation vs large cap growth), international (held up better in 70s inflation, may or may not help in future inflations), real assets (homes, REITS, gold, commodities- these are kind of hit and miss and may or may not provide inflation protection but typically have more modest long term real returns)
When discussing inflation you have at least 2 components, the first part is rising inflation, where inflation may rise above interest rates. Many assets, apart from conventional bonds, may do well as increasing money supply pushes all of these asset classes upward. The second part of inflation is if and when it doesn't die off on its own and govt/fed steps in to stop it, usually by raising interest rates. This is typically hard on both stocks and bonds.
Building a portfolio to protect agsinst inflation can simplistically be a trade off. You may choose to devote a portion of your portfolio to inflation sensitive assets, but many of these assets tend to be less lucrative in the very long term.
In my case I buy as much ibonds as I can, devote a portion of bond portfolio to TIPS, market weight international stocks, and have modest tilts to small cap value, plus a small smattering of REITS, gold and silver. That may provide some protection.But it will cost you when interest rates and inflation are near zero and FAANG stocks are going up 25% a year.
Well summarized.
(should be printed out and hung on office door).. . or at least the "Wiki door".
Yes. The last statement is the "elephant in the room" to every overly conservative approach or flee to "safe haven".
Sort of like pulling your race car over to the pit area while the rest of the Nascar racers fly by, trying to congratulate yourself that your car is "safe".
OP: this missive is about all that get's bantered back and forth on most inflation threads. Great summary.
j
Re: Suggestion for BH posts on Inflation?
OP,
You don't want to search for yourself to find threads/posts that resonate with you?
https://www.google.com/search?sitesearc ... =inflation
You don't want to search for yourself to find threads/posts that resonate with you?
https://www.google.com/search?sitesearc ... =inflation
Remember when you wanted what you currently have?
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Re: Suggestion for BH posts on Inflation?
Thanks - JBTX/Sandtrap - that definitely gets me kickstarted!
Re: Suggestion for BH posts on Inflation?
Sometimes the answer is you just lose regardless of what you do. Conveniently the world has provided us with a pandemic to go along with inflation, so lower discretionary spending (virtually no travel, restaurant meals, no commuting to work, no need for a new vehicle, etc.) may well compensate (if not more) for inflation.