TIPS percentage in Bond allocation
TIPS percentage in Bond allocation
After buying I bond, I am trying to rebalance TIPS (VIPSX and FIPDX).
Right now I have about 33% TIPS in my bond allocation (including I bond). I am at 54 targeting 2030.
I looked at Vanguard target funds. They seems little or no TIPS holding until retirement.
However, when I look at Blackrock LifePath Index funds, they hold TIPS around 10-20% of their bond allocation.
Even confusing to me, they seems to hold less approaching retirement. Any idea why? What is a good TIPS percentage in Bond allocation?
LIRIX/retirement 13.3%, LIBIX/2025 14.7%, LINIX/2030 16.6%, LIJIX/203518.9%
Right now I have about 33% TIPS in my bond allocation (including I bond). I am at 54 targeting 2030.
I looked at Vanguard target funds. They seems little or no TIPS holding until retirement.
However, when I look at Blackrock LifePath Index funds, they hold TIPS around 10-20% of their bond allocation.
Even confusing to me, they seems to hold less approaching retirement. Any idea why? What is a good TIPS percentage in Bond allocation?
LIRIX/retirement 13.3%, LIBIX/2025 14.7%, LINIX/2030 16.6%, LIJIX/203518.9%
Re: TIPS percentage in Bond allocation
There is no correct answer per se. This is true for the specific question at hand or more generally for asset allocation.
Different people have different opinions on people's risk tolerance. There are different opinions on how TIPS work in relationship to nominal bonds.
Not huge fundamental differences, but different enough to get different allocations.
Personally, I have a slightly negative opinion on TIPS. I think that they are relatively expensive compared to nominal bonds for the additional inflation protection they offer. But this is a opinion.
Different people have different opinions on people's risk tolerance. There are different opinions on how TIPS work in relationship to nominal bonds.
Not huge fundamental differences, but different enough to get different allocations.
Personally, I have a slightly negative opinion on TIPS. I think that they are relatively expensive compared to nominal bonds for the additional inflation protection they offer. But this is a opinion.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Re: TIPS percentage in Bond allocation
Correct. There is no universal answer, including the allocations in TD funds.
The best choice depends on what risks the individual finds most in need of management. For me the risk of inflation seems high enough to justify an explicit choice of holding half of bonds in TIPS. For me it is an open question whether all the bond holding should be TIPS. But I am long retired and also have a fixed pension of significant magnitude.
I do find it strange, however, to make small allocations to TIPS because I don't see enough effect there to have a point.
The best choice depends on what risks the individual finds most in need of management. For me the risk of inflation seems high enough to justify an explicit choice of holding half of bonds in TIPS. For me it is an open question whether all the bond holding should be TIPS. But I am long retired and also have a fixed pension of significant magnitude.
I do find it strange, however, to make small allocations to TIPS because I don't see enough effect there to have a point.
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Re: TIPS percentage in Bond allocation
Here is 60/40 with 1) TIPS, (2) Intermediate Treasuries, and (3) Total US Bond Market. As you can see it does not make a big difference even if you go with 100% one or the other.
https://imgur.com/hEGEvQV
For what it's worth, TIPS have outperformed but most of that came in the last year with the inflation spike. Up until that point total return was pretty close. Intermediate Treasuries have done the best job at reducing portfolio volatility, with significantly lower max drawdown and less bad worst year. I would not do more than 50% TIPS personally because I do not want my bond allocation to be going down in a deflationary situation that is likely to also negatively impact stocks.
https://imgur.com/hEGEvQV
For what it's worth, TIPS have outperformed but most of that came in the last year with the inflation spike. Up until that point total return was pretty close. Intermediate Treasuries have done the best job at reducing portfolio volatility, with significantly lower max drawdown and less bad worst year. I would not do more than 50% TIPS personally because I do not want my bond allocation to be going down in a deflationary situation that is likely to also negatively impact stocks.
Re: TIPS percentage in Bond allocation
While I agree with the point, I must quibble about the word "does" here:aristotelian wrote: ↑Wed Jan 26, 2022 9:33 am Here is 60/40 with 1) TIPS, (2) Intermediate Treasuries, and (3) Total US Bond Market. As you can see it does not make a big difference even if you go with 100% one or the other.
https://imgur.com/hEGEvQV
For what it's worth, TIPS have outperformed but most of that came in the last year with the inflation spike. Up until that point total return was pretty close. Intermediate Treasuries have done the best job at reducing portfolio volatility, with significantly lower max drawdown and less bad worst year. I would not do more than 50% TIPS personally because I do not want my bond allocation to be going down in a deflationary situation that is likely to also negatively impact stocks.
I think it is fairer to say "did not make a big difference". As you later say, there are scenarios (like deflation) that weren't in the time period. Mind you I-bonds (with their 0% composite floor) also protect somewhat against deflation. I have 1/3 of my bonds in TIPs+I-bonds, but no particularly good reason for it not to be 50%. It is on my list of "things to slowly consider as IPS changes", but doing it now feels rather like chasing for my taste so it will sit on the list. Part of the case I could see for 50% is that it is (I believe?) a neutral position with regard to whether inflation is higher or lower than predicted by the market.As you can see it does not make a big difference even if you go with 100% one or the other.
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Re: TIPS percentage in Bond allocation
Agreed, that is a good correction. The future does not have to be like the past, especially coming off historical record low interest rates and low inflation.Da5id wrote: ↑Wed Jan 26, 2022 9:43 amWhile I agree with the point, I must quibble about the word "does" here:aristotelian wrote: ↑Wed Jan 26, 2022 9:33 am Here is 60/40 with 1) TIPS, (2) Intermediate Treasuries, and (3) Total US Bond Market. As you can see it does not make a big difference even if you go with 100% one or the other.
https://imgur.com/hEGEvQV
For what it's worth, TIPS have outperformed but most of that came in the last year with the inflation spike. Up until that point total return was pretty close. Intermediate Treasuries have done the best job at reducing portfolio volatility, with significantly lower max drawdown and less bad worst year. I would not do more than 50% TIPS personally because I do not want my bond allocation to be going down in a deflationary situation that is likely to also negatively impact stocks.
I think it is fairer to say "did not make a big difference". As you later say, there are scenarios (like deflation) that weren't in the time period. Mind you I-bonds (with their 0% composite floor) also protect somewhat against deflation. I have 1/3 of my bonds in TIPs+I-bonds, but no particularly good reason for it not to be 50%. It is on my list of "things to slowly consider as IPS changes", but doing it now feels rather like chasing for my taste so it will sit on the list. Part of the case I could see for 50% is that it is (I believe?) a neutral position with regard to whether inflation is higher or lower than predicted by the market.As you can see it does not make a big difference even if you go with 100% one or the other.
- mrpotatoheadsays
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Re: TIPS percentage in Bond allocation
The first question to ask is: Are you using bonds for preservation of capital (low risk) or total return (not low risk)?
For the preservation of capital, via the safety of Treasury bonds, Paul Merriman recommends:
Intermediate-term Treasury bonds (50%)
Short-term Treasury bonds (30%)
Short-term TIPS (20%)
Two years ago, I switched to:
Intermediate-term Treasury bonds (30%)
Intermediate-term TIPS (20%)
Short-term Treasury bonds (30%)
Short-term TIPS (20%)
In 2021, interest rates rose and inflation was unexpectedly high; the diversified Treasury bond portfolio (above) returned 1.2% while the Vanguard Total Bond Market Index returned -1.67% (a delta of 2.87%).
Reference: https://www.portfoliovisualizer.com/bac ... tion5_3=20
Re: TIPS percentage in Bond allocation
To expand, the two risk factors that characterize bonds are credit risk and term risk. Credit risk can be found in the bond rating and term risk in the duration. Treasuries and TIPS have no credit risk (nominally anyway) but have a duration. I bonds have neither in a formal sense but there is still credit risk in the sense of reinvestment or opportunity risk. This manifests for todays investor in evaluating the worth of choosing a fixed real return of 0%.
A different risk is inflation, which is formally reduced to zero for TIPS and I bonds. I say formally in the sense of the indexing of the bond by CPI inflation, but that does not mean the real return at the time of purchase cannot be negative for TIPS, nor for TIPS that the duration risk cannot depress the return or enhance it.
A common discussion is to ponder whether or not or when TIPS will or won't "beat" Treasuries. In my opinion that is a pointless discussion. You either want to manage the risks of credit, term, and inflation or you don't. It is fair to ponder the costs of that. It seems that the inflation risk premium for TIPS is very small.
A different risk is inflation, which is formally reduced to zero for TIPS and I bonds. I say formally in the sense of the indexing of the bond by CPI inflation, but that does not mean the real return at the time of purchase cannot be negative for TIPS, nor for TIPS that the duration risk cannot depress the return or enhance it.
A common discussion is to ponder whether or not or when TIPS will or won't "beat" Treasuries. In my opinion that is a pointless discussion. You either want to manage the risks of credit, term, and inflation or you don't. It is fair to ponder the costs of that. It seems that the inflation risk premium for TIPS is very small.
Re: TIPS percentage in Bond allocation
There is no specific guidelines on this, but you can figure this out with some simple math and get to a reasonable number that works for you. Given you are closer to retirement, it actually makes sense to include some inflation protection if you get concerns about it. The current real yield on Intermediate TIPS fund is -1.6% and on Inter-Term Treasury fund is +1.4%, however when you add in the inflation component to adjust to CPI things change.
Let's say inflation averages 3.5% to 4% in the next 8 years up to your planned retirement, in that scenario when you add 3.5% to 4% to the -1.6% yield you get about 1.9% to 2.4% equivalent of nominal rates, this comes out slightly ahead of the Inter-Term Treasury fund rate based on current yield. Both will lose to inflation though, but TIPS slightly less so. But this is a simple calculation that doesn't take into account other factors such as effect of rising rates on both funds, inflation expectations from market and the premium/liquidity etc that plays into pricing. You could make a reasonable estimate that given where things are if you don't like the odds of nominal bonds alone to do the job, then add in TIPS, up to 50% is fine. The idea is not to beat the Total Bond market or Treasury market, but to hedge against rising inflation if that happens, if inflation comes out lower and nominal bonds "win" then you should be okay with that outcome.
Re: TIPS percentage in Bond allocation
I think I read somewhere that take risk/seek return in stock and preserve capital in bond. That is the reason I use VBMFX rather than PTTRX which I cannot find risk/duration info in morning star. Any comment?mrpotatoheadsays wrote: ↑Wed Jan 26, 2022 10:17 amThe first question to ask is: Are you using bonds for preservation of capital (low risk) or total return (not low risk)?
For the preservation of capital, via the safety of Treasury bonds, Paul Merriman recommends:
Intermediate-term Treasury bonds (50%)
Short-term Treasury bonds (30%)
Short-term TIPS (20%)
Two years ago, I switched to:
Intermediate-term Treasury bonds (30%)
Intermediate-term TIPS (20%)
Short-term Treasury bonds (30%)
Short-term TIPS (20%)
In 2021, interest rates rose and inflation was unexpectedly high; the diversified Treasury bond portfolio (above) returned 1.2% while the Vanguard Total Bond Market Index returned -1.67% (a delta of 2.87%).
Reference: https://www.portfoliovisualizer.com/bac ... tion5_3=20
On a related topic, do we need international Bonds in bond allocation. Vanguard target and life strategy funds hold 30% intl bond in bond allocation while Blackrock Lifepath Index none.
I use Blackrock target funds/PTTRX as reference as they are available in my 401K.
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Re: TIPS percentage in Bond allocation
TIPS protect against unexpected inflation, but at a cost.
There is no consensus among expert of how big of a risk unexpected inflation is...
Hence the opinions of how much to allocate to TIPS differ wildly.
There is no consensus among expert of how big of a risk unexpected inflation is...
Hence the opinions of how much to allocate to TIPS differ wildly.
25% VTI | 25% VXUS | 12.5% AVUV | 10% AVDV | 2.5% VWO | 25% BND/SCHR/SCHP
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Re: TIPS percentage in Bond allocation
I think you are right on this. I personally think that it really depends on how much is already inflation protected or at least kind of so. Those with high amount of bonds probably should have more TIPS than those with a lot of stocks.alex_686 wrote: ↑Wed Jan 26, 2022 9:03 am There is no correct answer per se. This is true for the specific question at hand or more generally for asset allocation.
Different people have different opinions on people's risk tolerance. There are different opinions on how TIPS work in relationship to nominal bonds.
Not huge fundamental differences, but different enough to get different allocations.
Personally, I have a slightly negative opinion on TIPS. I think that they are relatively expensive compared to nominal bonds for the additional inflation protection they offer. But this is a opinion.
There is a limit of how much deflation affects TIPS (if I understand it right). Therefore, there is a type of European put option also included (which has to have a premium) with the inflation protection. Whether it is expensive or not is debatable.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
Re: TIPS percentage in Bond allocation
For us as retirees, the purpose of bonds in our portfolio is risk mitigation. The purpose of equities is growth of our portfolio. At present, for us (mid 60s and mid-70s), risk mitigation trumps portfolio growth. That was not the case for the first 30+ years of our investing lives (approx. ages 25-55), when growth of our investment resources predominated, and our portfolio was nearly entirely in equities. We essentially moved from an 80/20 (equities/fixed income) portfolio to a 20/80 portfolio over 15 years, beginning in my late 50s and culminating in our present 20/80 portfolio.dbr wrote: ↑Wed Jan 26, 2022 10:25 am To expand, the two risk factors that characterize bonds are credit risk and term risk. Credit risk can be found in the bond rating and term risk in the duration. Treasuries and TIPS have no credit risk (nominally anyway) but have a duration. I bonds have neither in a formal sense but there is still credit risk in the sense of reinvestment or opportunity risk. This manifests for todays investor in evaluating the worth of choosing a fixed real return of 0%.
A different risk is inflation, which is formally reduced to zero for TIPS and I bonds. I say formally in the sense of the indexing of the bond by CPI inflation, but that does not mean the real return at the time of purchase cannot be negative for TIPS, nor for TIPS that the duration risk cannot depress the return or enhance it.
A common discussion is to ponder whether or not or when TIPS will or won't "beat" Treasuries. In my opinion that is a pointless discussion. You either want to manage the risks of credit, term, and inflation or you don't. It is fair to ponder the costs of that. It seems that the inflation risk premium for TIPS is very small.
The beauty of a TIPS ladder is that credit risk, term risk, and inflation risk are all mitigated; what is not mitigated is longevity risk. We have chosen a very conservative (and somewhat more expensive) approach to place all of our bond investments in a TIPS ladder, which extends to my age 97 (spouses age 87). It does indeed represent 75-80% of our retirement portfolio, with the remainder in equities (global indexed portfolio, with a slight factor tilt). At some point in the future, when exactly not yet certain, we intend to convert the tail end of our TIPS ladder plus some portion of our equities into an immediate annuity, and we follow annuity rates and costs closely.
For us, there is no role for nominal treasuries, and no role for commercial bonds. Our risk is taken with equities entirely. I will admit that we have taken what for many seems an extreme approach to LMP/RISK PORTFOLIO. It is a portfolio and approach that is appropriate for us, and readily implementable, with no need for a financial advisor.
Understand your financial position, your needs, and your emotional makeup - also understand why you are choosing the approach you are. And read as much as you can.
Re: TIPS percentage in Bond allocation
We can debate how accurately TIPS pricing captures expected inflation. The real feature of TIPS is that they protect you from the low chance of a period of high unexpected inflation. It is like buying car insurance. You probably would be better off self insuring expect for that rare case when you do need it. And for the vast period of TIPS history you have not needed it. Expect maybe for recent periods.secondopinion wrote: ↑Wed Jan 26, 2022 11:02 am I think you are right on this. I personally think that it really depends on how much is already inflation protected or at least kind of so. Those with high amount of bonds probably should have more TIPS than those with a lot of stocks.
There is a limit of how much deflation affects TIPS (if I understand it right). Therefore, there is a type of European put option also included (which has to have a premium) with the inflation protection. Whether it is expensive or not is debatable.
So the par value of TIPS get adjusted by inflation or deflation. IIRC, TIPS always tend to fall a bit in the spring due to the seasonal fall in energy prices. But it can't fall below the initial issue of $100 par. So TIPS purchase at issue at $100 should be safe. Those bought on the secondary market may have issues. However, I seriously doubt that the US will enter a long period of deflation.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
- mrpotatoheadsays
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Re: TIPS percentage in Bond allocation
I take my risks in equities (small-caps are 50% of my equity partition). Over the long-term, high risk in equities can reward an additional ~3% annually (e.g. small-cap value vs large-cap blend); high risk in bonds can reward considerably less.t24b350 wrote: ↑Wed Jan 26, 2022 10:42 am I think I read somewhere that take risk/seek return in stock and preserve capital in bond. That is the reason I use VBMFX rather than PTTRX which I cannot find risk/duration info in morning star. Any comment?
On a related topic, do we need international Bonds in bond allocation. Vanguard target and life strategy funds hold 30% intl bond in bond allocation while Blackrock Lifepath Index none.
When you invest in a US Total Bond Market index you are taking risks to achieve a higher total return. Those risks include interest rate increase, unexpected inflation and stock market downturn. Those risks correlate to intermediate and long-term duration, non-inflation adjusted securities, corporate and securitized debt.
Again, my bond partition is 100% US Treasury; I do not invest in international bonds. I believe last week's Paul Merriman podcast mentioned that 2021's international returns were subdued by currency exchange. If your goal is preservation of capital, there is zero reason to add currency risk to the bond partition.
- gmaynardkrebs
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Re: TIPS percentage in Bond allocation
Dollar decline. I own an un-hedged international bond fund (RPIBX).mrpotatoheadsays wrote: ↑Wed Jan 26, 2022 11:36 amIf your goal is preservation of capital, there is zero reason to add currency risk to the bond partition.
Re: TIPS percentage in Bond allocation
The bond portion of my portfolio is 40% total US bond fund, 30% ex-US bond fund, 30% TIPS bond fund. I feel like I get exposure to bonds around the world and get some inflation protection, but I think it probably won't matter much in the end.
I also have some I-Bonds as part of my emergency fund, but I mentally put that in a different bucket.
I also have some I-Bonds as part of my emergency fund, but I mentally put that in a different bucket.
May all your index funds gain +0.5% today.
Re: TIPS percentage in Bond allocation
Several ways of viewing the OPs question
-- hold TIPS in proportion to the total investment grade bond market. As Bogleheads we believe in holding total market index funds. Let the market decide the proportion (value) of TIPS vs. nominal, duration, credit quality, etc. This may be the thinking behind the percentage in some TR funds. ***should be the Boglehead simplistic approach, but still requires work because no total all inclusive index funds seem to exist***
-- use TIPS as a tool to pay you out income in retirement. Since they are "real" instruments, if you know you will need 10k in 2030, you can buy a TIPS maturing in 2030 today and solve that problem immediately. Extend that thought for your entire retirement. Note this is not the kind of thinking normally employed by investors that want "money to work for them". Instead, that's just buying a ticket for the future, and with real rates negative, there is an up front cost to do it. I consider my I Bond purchases to be a "poor man's TIPS ladder".
-- come up with some arbitrary percentage and rebalance to it. 50/50 (TIPS:Nom) is interesting because it implies that the market can be wrong about pricing future inflation, so you have some bets on if they got it right and some on if they got it wrong.
-- go 100% TIPS. There's really no reason not to from a theoretical framework. TIPS eliminate inflation risk, and they are of highest credit quality.
Take your risk on the equity side. Bonds are for safety.
-- have more TIPS the larger percentage of bonds there are in your portfolio because you are more exposed to inflation risk. More bonds than a 60/40 portfolio might be one that considers adding TIPS. The idea is that that isn't enough stock risk to counter inflation risk. TR funds are in this category and some let TIPS percentage creep up the closer they get to their retirement date.
-- hold TIPS in proportion to the total investment grade bond market. As Bogleheads we believe in holding total market index funds. Let the market decide the proportion (value) of TIPS vs. nominal, duration, credit quality, etc. This may be the thinking behind the percentage in some TR funds. ***should be the Boglehead simplistic approach, but still requires work because no total all inclusive index funds seem to exist***
-- use TIPS as a tool to pay you out income in retirement. Since they are "real" instruments, if you know you will need 10k in 2030, you can buy a TIPS maturing in 2030 today and solve that problem immediately. Extend that thought for your entire retirement. Note this is not the kind of thinking normally employed by investors that want "money to work for them". Instead, that's just buying a ticket for the future, and with real rates negative, there is an up front cost to do it. I consider my I Bond purchases to be a "poor man's TIPS ladder".
-- come up with some arbitrary percentage and rebalance to it. 50/50 (TIPS:Nom) is interesting because it implies that the market can be wrong about pricing future inflation, so you have some bets on if they got it right and some on if they got it wrong.
-- go 100% TIPS. There's really no reason not to from a theoretical framework. TIPS eliminate inflation risk, and they are of highest credit quality.
Take your risk on the equity side. Bonds are for safety.
-- have more TIPS the larger percentage of bonds there are in your portfolio because you are more exposed to inflation risk. More bonds than a 60/40 portfolio might be one that considers adding TIPS. The idea is that that isn't enough stock risk to counter inflation risk. TR funds are in this category and some let TIPS percentage creep up the closer they get to their retirement date.
Then ’tis like the breath of an unfee’d lawyer.
Re: TIPS percentage in Bond allocation
I think most would agree that I bonds purchased today should beat TIPS purchased today over the long term. The problem with I bonds is you can only buy 10k annually.
When I learned on this forum the opportunity to front-load I bond purchases by using the Treasury Direct gift box (there are separate threads on this), what I have done is shift a chunk of my fixed income to I bonds. It will take me a number of years to get all of these I bonds delivered out, but I am fine with this. We are in our late 40s planning to early retire, so no plans to spend it all at once anyways.
We still own plenty of total bond fund in our retirement accounts for rebalancing opportunities with our equity funds (we are 60/40 overall).
I like this position for us. It does eat up taxable space and limits our future Roth conversion opportunity, so I have had to balance that as well.
When I learned on this forum the opportunity to front-load I bond purchases by using the Treasury Direct gift box (there are separate threads on this), what I have done is shift a chunk of my fixed income to I bonds. It will take me a number of years to get all of these I bonds delivered out, but I am fine with this. We are in our late 40s planning to early retire, so no plans to spend it all at once anyways.
We still own plenty of total bond fund in our retirement accounts for rebalancing opportunities with our equity funds (we are 60/40 overall).
I like this position for us. It does eat up taxable space and limits our future Roth conversion opportunity, so I have had to balance that as well.
"The safe assumption for an investor is that over the next hundred years, the currency is going to zero." - Charlie Munger
Re: TIPS percentage in Bond allocation
Our TIPS target is 20% of all fixed income.
Can't say if that's high/low/correct/wrong. It's just what we chose.
Can't say if that's high/low/correct/wrong. It's just what we chose.
Re: TIPS percentage in Bond allocation
I don't think that is obvious at all, depending on how long your long run is.
It might be that a plan to purchase I bonds rather than TIPS now and then sell the I bonds and shift to TIPS later might be an ok bet for those who can get enough money into I bonds to make any difference.
Re: TIPS percentage in Bond allocation
I tie my nominal/TIPS split to my overall equity/bond asset allocation. I do this to put more into TIPS when my exposure to equities is reduced over time due to my glide path. For example, here are two ways to look at it in a 60 Equity / 40 Bond overall portfolio asset allocation:
- my TIPS allocation within my overall bond allocation is the same as my bond to equity allocation (e.g., 60E/40B would equate to 40% of my bonds being TIPS, thus 40%*40% = 16% TIPS overall);
- my nominal allocation within my overall bond allocation is the same as my equity to bond allocation (e.g., 60E/40B would equate to 60% of my bonds being nominal, thus 60%*40% = 24% nominal overall).
Code: Select all
Stocks Bonds Nominal TIPS
100% 0% 0% 0%
90% 10% 9% 1%
80% 20% 16% 4%
70% 30% 21% 9%
60% 40% 24% 16%
50% 50% 25% 25%
40% 60% 24% 36%
30% 70% 21% 49%
20% 80% 16% 64%
10% 90% 9% 81%
0% 100% 0% 100%
- willthrill81
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Re: TIPS percentage in Bond allocation
Considering that inflation, especially unexpected inflation, has historically been the single biggest threat to bonds, it baffles me why an investor would not choose to protect against that risk with TIPS and/or I bonds if the cost for doing so was very small, which it arguably is.
The Sensible Steward
Re: TIPS percentage in Bond allocation
I agree. It is a basic argument for why the TIPS (or I bond) allocation should be 100% of bonds. The idea that maybe over some period of time nominal bonds "beat" TIPS is really irrelevant when the issue is managing risk. There are a lot of tactics suggested in investing that ignore the point of risk. What risk is mitigated by not holding all of bonds in TIPS is a question.willthrill81 wrote: ↑Thu Jan 27, 2022 10:06 am Considering that inflation, especially unexpected inflation, has historically been the single biggest threat to bonds, it baffles me why an investor would not choose to protect against that risk with TIPS and/or I bonds if the cost for doing so was very small, which it arguably is.
Re: TIPS percentage in Bond allocation
The only concept that comes to mind is this notion that TIPS are a very small fraction of the investment grade bond market. From that perspective there just are not enough of them that exist to allow everyone to go 100% TIPS. Therefore, there's some sort of a theoretical line where demand for TIPS being greater than supply skews their value. For all I know, this may very well be a reality today. Only from that perspective, not from theory but from reality, would it make sense to vary one's fixed income holdings. If TIPS were ubiquitous, then no argument.dbr wrote: ↑Thu Jan 27, 2022 10:19 amI agree. It is a basic argument for why the TIPS (or I bond) allocation should be 100% of bonds. The idea that maybe over some period of time nominal bonds "beat" TIPS is really irrelevant when the issue is managing risk. There are a lot of tactics suggested in investing that ignore the point of risk. What risk is mitigated by not holding all of bonds in TIPS is a question.willthrill81 wrote: ↑Thu Jan 27, 2022 10:06 am Considering that inflation, especially unexpected inflation, has historically been the single biggest threat to bonds, it baffles me why an investor would not choose to protect against that risk with TIPS and/or I bonds if the cost for doing so was very small, which it arguably is.
Then ’tis like the breath of an unfee’d lawyer.
- gmaynardkrebs
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Re: TIPS percentage in Bond allocation
People are confused about them. Some of that is understandable, as they do have a few more moving parts than other bonds. However, IMO, the major part is the shocking amount of misinformation disseminated by the brokerage and mutual fund industry and the so-called "pundits," such as "phantom income" (irrelevant to TIPS funds and TIPS bonds in retirement accounts), alleged lack of correlation to inflation (TIPS held to maturity correlate exactly with inflation), that CPI does not reflect actual inflation (debatable at best, but if so, that impacts real return calculations of all asset classes), and that stocks provide as good or better inflation protection (the protection is not guaranteed, to say the least).willthrill81 wrote: ↑Thu Jan 27, 2022 10:06 am Considering that inflation, especially unexpected inflation, has historically been the single biggest threat to bonds, it baffles me why an investor would not choose to protect against that risk with TIPS and/or I bonds if the cost for doing so was very small, which it arguably is.
Re: TIPS percentage in Bond allocation
Those are all good observations.gmaynardkrebs wrote: ↑Thu Jan 27, 2022 10:35 amPeople are confused about them. Some of that is understandable, as they do have a few more moving parts than other bonds. However, IMO, the major part is the shocking amount of misinformation disseminated by the brokerage and mutual fund industry and the so-called "pundits," such as "phantom income" (irrelevant to TIPS funds and TIPS bonds in retirement accounts), alleged lack of correlation to inflation (TIPS held to maturity correlate exactly with inflation), that CPI does not reflect actual inflation (debatable at best, but if so, that impacts real return calculations of all asset classes), and that stocks provide as good or better inflation protection (the protection is not guaranteed, to say the least).willthrill81 wrote: ↑Thu Jan 27, 2022 10:06 am Considering that inflation, especially unexpected inflation, has historically been the single biggest threat to bonds, it baffles me why an investor would not choose to protect against that risk with TIPS and/or I bonds if the cost for doing so was very small, which it arguably is.
- arcticpineapplecorp.
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Re: TIPS percentage in Bond allocation
Rick Ferri wrote a Forbes article in 2013 (Tips on TIPS) about doing 20% of your TOTAL fixed income position in TIPS as sort of the sweet spot. here's the article to read more: https://www.forbes.com/sites/rickferri/ ... b9649c92ea
fwiw, the target date retirement INCOME fund at vanguard contains 17% OVERALL in TIPS, which represents around 24% of the TOTAL fixed income portion so that's not much different from what Rick Ferri recommended in his Tips on TIPS article for Forbes.
source: https://investor.vanguard.com/mutual-fu ... file/VTINX
More recently, in Rick Ferri's Core-4 Inflation Fighter portfolio he has 20% of the overall portfolio in TIPS, but this represents 50% of the fixed income portion in TIPS (source: https://core-4.com/inflation-fighter-core-4-portfolio/).
so somewhere between 20%-50% of the fixed income portion of the portfolio could be in TIPS.
Also, I think it's funny that everytime something happens in the economy people want to be changing things. Now it's inflation, "so what do y'all think about I Bonds and TIPS?"
A portfolio isn't meant to be changed everytime we have inflation, recession, prosperity, etc. It's supposed to be designed to handle different situations over time and therefore you will have parts of your portfolio that will do well and others that won't, and that will change over time as conditions change.
Notice the Vanguard Target Date portfolio once it gets to 30/70 (when it becomes target date retirement income fund) doesn't change after that. It keeps the portfolio the same from assuming around age 72 or so to death.
fwiw, the target date retirement INCOME fund at vanguard contains 17% OVERALL in TIPS, which represents around 24% of the TOTAL fixed income portion so that's not much different from what Rick Ferri recommended in his Tips on TIPS article for Forbes.
source: https://investor.vanguard.com/mutual-fu ... file/VTINX
More recently, in Rick Ferri's Core-4 Inflation Fighter portfolio he has 20% of the overall portfolio in TIPS, but this represents 50% of the fixed income portion in TIPS (source: https://core-4.com/inflation-fighter-core-4-portfolio/).
so somewhere between 20%-50% of the fixed income portion of the portfolio could be in TIPS.
Also, I think it's funny that everytime something happens in the economy people want to be changing things. Now it's inflation, "so what do y'all think about I Bonds and TIPS?"
A portfolio isn't meant to be changed everytime we have inflation, recession, prosperity, etc. It's supposed to be designed to handle different situations over time and therefore you will have parts of your portfolio that will do well and others that won't, and that will change over time as conditions change.
Notice the Vanguard Target Date portfolio once it gets to 30/70 (when it becomes target date retirement income fund) doesn't change after that. It keeps the portfolio the same from assuming around age 72 or so to death.
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- willthrill81
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Re: TIPS percentage in Bond allocation
Yes, you're correct.gmaynardkrebs wrote: ↑Thu Jan 27, 2022 10:35 amPeople are confused about them. Some of that is understandable, as they do have a few more moving parts than other bonds. However, IMO, the major part is the shocking amount of misinformation disseminated by the brokerage and mutual fund industry and the so-called "pundits," such as "phantom income" (irrelevant to TIPS funds and TIPS bonds in retirement accounts), alleged lack of correlation to inflation (TIPS held to maturity correlate exactly with inflation), that CPI does not reflect actual inflation (debatable at best, but if so, that impacts real return calculations of all asset classes), and that stocks provide as good or better inflation protection (the protection is not guaranteed, to say the least).willthrill81 wrote: ↑Thu Jan 27, 2022 10:06 am Considering that inflation, especially unexpected inflation, has historically been the single biggest threat to bonds, it baffles me why an investor would not choose to protect against that risk with TIPS and/or I bonds if the cost for doing so was very small, which it arguably is.
The Sensible Steward
Re: TIPS percentage in Bond allocation
We are always fighting the last battlearcticpineapplecorp. wrote: ↑Thu Jan 27, 2022 10:39 am Also, I think it's funny that everytime something happens in the economy people want to be changing things. Now it's inflation, "so what do y'all think about I Bonds and TIPS?"
A portfolio isn't meant to be changed everytime we have inflation, recession, prosperity, etc. It's supposed to be designed to handle different situations over time and therefore you will have parts of your portfolio that will do well and others that won't, and that will change over time as conditions change.
On the one hand, people shouldn't performance chase (other than I-bonds, where, well, I don't see a real downside to chasing into them). On the other, perhaps a circumstance they've never considered or for which their portfolio wasn't prepared, can make someone rethink their *long term strategy*. I think people should be slow to change their plan. Let ideas for changing things marinate for a good long time (at least 6 months or a year sounds good to me). But that doesn't mean they can't realize things like "my portfolio isn't adequately protected against inflation" or "gee, maybe international was a good idea after all (if it is, don't want to start that here)".
- vanbogle59
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Re: TIPS percentage in Bond allocation
People are confused about them. Some of that is understandable, as they do have a few more moving parts than other bonds.
[/quote]
Do any of those "more moving parts" create new considerations when choosing bond funds?
IOW, these 2 are pretty similar, except one uses TIPS:
VAIPX - Vanguard Inflation-Protect Sec Adm - Average maturity 7.9 yr Average duration 7.5 yr
VBILX - Vanguard Inter-Term Bond Index Adm - Average duration 7.2 yr Average duration 6.6 yr
Right?
Re: TIPS percentage in Bond allocation
So you think a TIPS purchased these days at a treasury auction, presumably with a negative real yield, has a higher expected return than an I bond purchased this month?dbr wrote: ↑Thu Jan 27, 2022 9:36 amI don't think that is obvious at all, depending on how long your long run is.
It might be that a plan to purchase I bonds rather than TIPS now and then sell the I bonds and shift to TIPS later might be an ok bet for those who can get enough money into I bonds to make any difference.
I think you skipped the purchased today part.
"The safe assumption for an investor is that over the next hundred years, the currency is going to zero." - Charlie Munger
Re: TIPS percentage in Bond allocation
No, that is not true in the sense that SEC yield is now negative and the current real return on TIPS is negative. I would say that if you were to invest in a TIPS mutual fund today, or hold the one you already own, starting now, and keep that investment over the next 15-20-25-30-35-40 etc. years that the CAGR for the duration is most likely going to be positive real. Expected return is not a setting that sticks with the investment forever. Of course we all know the future prospects for any investment are uncertain, but that would be my guess. The chances that TIPS fund will deliver a positive real CAGR over the next 5-10 years is very small, again just guessing.loukycpa wrote: ↑Thu Jan 27, 2022 11:03 amSo you think a TIPS purchased these days at a treasury auction, presumably with a negative real yield, has a higher expected return than an I bond purchased this month?dbr wrote: ↑Thu Jan 27, 2022 9:36 amI don't think that is obvious at all, depending on how long your long run is.
It might be that a plan to purchase I bonds rather than TIPS now and then sell the I bonds and shift to TIPS later might be an ok bet for those who can get enough money into I bonds to make any difference.
I think you skipped the purchased today part.
Last edited by dbr on Thu Jan 27, 2022 11:23 am, edited 1 time in total.
- gmaynardkrebs
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Re: TIPS percentage in Bond allocation
Not sure I truly understand your question. But one clear difference is that VBLIX is 50% corporate bonds, so there is default risk on that portion of the portfolio. There is no default risk with VAIPX as it is all US Treasury bonds.vanbogle59 wrote: ↑Thu Jan 27, 2022 10:58 amgmaynardkrebs wrote: ↑Thu Jan 27, 2022 10:35 am People are confused about them. Some of that is understandable, as they do have a few more moving parts than other bonds.
Do any of those "more moving parts" create new considerations when choosing bond funds?
IOW, these 2 are pretty similar, except one uses TIPS:
VAIPX - Vanguard Inflation-Protect Sec Adm - Average maturity 7.9 yr Average duration 7.5 yr
VBILX - Vanguard Inter-Term Bond Index Adm - Average duration 7.2 yr Average duration 6.6 yr
Right?
Re: TIPS percentage in Bond allocation
My two bits is the observation that TIPS do not have credit risk and that the term risk is relative to real interest rates. I guess I don't know if the real rate volatility is less than the nominal rate volatility. The issue is that one presumes that if following real return TIPS are less volatile than nominals, but I don't know what happens to the volatility of nominal return.vanbogle59 wrote: ↑Thu Jan 27, 2022 10:58 am
Do any of those "more moving parts" create new considerations when choosing bond funds?
IOW, these 2 are pretty similar, except one uses TIPS:
VAIPX - Vanguard Inflation-Protect Sec Adm - Average maturity 7.9 yr Average duration 7.5 yr
VBILX - Vanguard Inter-Term Bond Index Adm - Average duration 7.2 yr Average duration 6.6 yr
Right?
- gmaynardkrebs
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Re: TIPS percentage in Bond allocation
I *think* that all we can say is that if you buy an actual 10 year TIPS today and hold to maturity, you will get back in "real" purchasing power exactly what you put in, minus the negative yield you are being quoted. I'm not sure you can say that of a fund, as it's buying new bonds as the old ones mature, and we don't know what the prices of the replacement bonds will be. [Edit: I agree with you post right above this, which went up before this one.]dbr wrote: ↑Thu Jan 27, 2022 11:22 amNo, that is not true in the sense that SEC yield is now negative and the current real return on TIPS is negative. I would say that if you were to invest in a TIPS mutual fund today, or hold the one you already own, starting now, and keep that investment over the next 15-20-25-30-35-40 etc. years that the CAGR for the duration is most likely going to be positive real. Expected return is not a setting that sticks with the investment forever. Of course we all know the future prospects for any investment are uncertain, but that would be my guess. The chances that TIPS fund will deliver a positive real CAGR over the next 5-10 years is very small, again just guessing.loukycpa wrote: ↑Thu Jan 27, 2022 11:03 amSo you think a TIPS purchased these days at a treasury auction, presumably with a negative real yield, has a higher expected return than an I bond purchased this month?dbr wrote: ↑Thu Jan 27, 2022 9:36 amI don't think that is obvious at all, depending on how long your long run is.
It might be that a plan to purchase I bonds rather than TIPS now and then sell the I bonds and shift to TIPS later might be an ok bet for those who can get enough money into I bonds to make any difference.
I think you skipped the purchased today part.
Re: TIPS percentage in Bond allocation
Right. The question being asked is whether or not TIPS held for the long run are not going to even generate a positive real return starting from now.gmaynardkrebs wrote: ↑Thu Jan 27, 2022 11:38 amI *think* that all we can say is that if you buy an actual 10 year TIPS today and hold to maturity, you will get back in "real" purchasing power exactly what you put in, minus the negative yield you are being quoted. I'm not sure you can say that of a fund, as it's buying new bonds as the old ones mature, and we don't know what the prices of the replacement bonds will be. [Edit: I agree with you post right above this, which went up before this one.]dbr wrote: ↑Thu Jan 27, 2022 11:22 amNo, that is not true in the sense that SEC yield is now negative and the current real return on TIPS is negative. I would say that if you were to invest in a TIPS mutual fund today, or hold the one you already own, starting now, and keep that investment over the next 15-20-25-30-35-40 etc. years that the CAGR for the duration is most likely going to be positive real. Expected return is not a setting that sticks with the investment forever. Of course we all know the future prospects for any investment are uncertain, but that would be my guess. The chances that TIPS fund will deliver a positive real CAGR over the next 5-10 years is very small, again just guessing.loukycpa wrote: ↑Thu Jan 27, 2022 11:03 amSo you think a TIPS purchased these days at a treasury auction, presumably with a negative real yield, has a higher expected return than an I bond purchased this month?dbr wrote: ↑Thu Jan 27, 2022 9:36 amI don't think that is obvious at all, depending on how long your long run is.
It might be that a plan to purchase I bonds rather than TIPS now and then sell the I bonds and shift to TIPS later might be an ok bet for those who can get enough money into I bonds to make any difference.
I think you skipped the purchased today part.
So the answer is that no one knows. We don't know what a bond fund will hold over the next 20-60 years and we don't know what TIPS will do other than the one's we can actually buy now. Today the 30 year real yield is -.03% or effectively dead even. If that number goes up as much next week as it did this week, then a 30 year TIPS will have a positive real yield. What might happen in years 31-60 when we have to buy a new TIPS is not known, but it is not known to be negative. I think the point is that it doesn't make a lot of sense to draw conclusions about long term holding by looking at data that applies today. Then, as far as that goes, ten years from now I bonds could have a 1%-2%-3% fixed rate, or not.
Re: TIPS percentage in Bond allocation
You can duration match TIPS funds (VTIP and LTPZ) to your expected liabilities. The bond funds are continually selling and buying bonds. You just have to rebalance every so often. This should provide: interest rate risk protection. You do pay an ER which is a drawback, but for this you have flexibility in your bond portfolio more so than with individual bonds in a ladder.
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Re: TIPS percentage in Bond allocation
I think the primary purpose of the bond portion of a portfolio is to hedge stocks against downturn based on the assumption that there is a negative correlation between bond and stock market performance. To be clear, I don’t think that assumption is accurate in a normal well functioning market, but is accurate in the price/interest control system that exists with the Federal Reserve. Nominal bonds usually do better in that recessionary/deflationary/interest rate cutting environment and are better than TIPS for this purpose.
To the extent that you want an inflation hedge, my read of the evidence is that commodity indices perform better than TIPS because the magnitude of their correlation is higher than TIPS and because they are a more direct measure of inflation (versus dollar depreciation) and better hedge a an international portfolio. They also have less credit risk with respect to US creditworthiness, which I think the market and this forum massively undervalue. [OT comments removed by admin LadyGeek]
Edit: There’s an argument, credit risk aside, that a US domiciled person who buys in US dollars might want their inflation hedge to incorporate the risk of dollar depreciation, but I imagine (haven’t researched this myself) that you can probably find a commodity index entirely priced in US dollars.
To the extent that you want an inflation hedge, my read of the evidence is that commodity indices perform better than TIPS because the magnitude of their correlation is higher than TIPS and because they are a more direct measure of inflation (versus dollar depreciation) and better hedge a an international portfolio. They also have less credit risk with respect to US creditworthiness, which I think the market and this forum massively undervalue. [OT comments removed by admin LadyGeek]
Edit: There’s an argument, credit risk aside, that a US domiciled person who buys in US dollars might want their inflation hedge to incorporate the risk of dollar depreciation, but I imagine (haven’t researched this myself) that you can probably find a commodity index entirely priced in US dollars.
- gmaynardkrebs
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Re: TIPS percentage in Bond allocation
TIPS held to maturity have a correlation of 1 with inflation. The technical term for a correlation higher than 1 is "error."TurtleBeatsHare wrote: ↑Thu Jan 27, 2022 5:55 pm To the extent that you want an inflation hedge, my read of the evidence is that commodity indices perform better than TIPS because the magnitude of their correlation is higher than TIPS and because they are a more direct measure of inflation...
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Re: TIPS percentage in Bond allocation
Many years ago I sold Vanguard Intermediate TIPS and consolidated with Total Bond to simplify. In hind sight this was a good decision.
Any short or intermediate term bond fund will provide safety and income to a portfolio.
Best.
Tony
Any short or intermediate term bond fund will provide safety and income to a portfolio.
Best.
Tony
John C. Bogle: “Simplicity is the master key to financial success."
Re: TIPS percentage in Bond allocation
New theory: if you have to ask if TIPS are right for you, they are.
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Re: TIPS percentage in Bond allocation
Or perhaps less total funds overall to reduce second guessing? Too many choices can create confusion!
Tony
John C. Bogle: “Simplicity is the master key to financial success."
Re: TIPS percentage in Bond allocation
Lack of TIPS can create second guessing when CPI YoY prints double digits.
Re: TIPS percentage in Bond allocation
Vanguard Target Date Retirement funds add TIPs leading up and into retirement. No choices, no confusion.
- willthrill81
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Re: TIPS percentage in Bond allocation
Whether there are 'enough' TIPS to go all around is completely irrelevant for a retail investor today. Everyone on this forum could move all of their fixed income into TIPS, and it wouldn't move the needle. Despite TIPS only representing a small portion of the Treasury market, it's such a mind bogglingly huge market that it doesn't matter.Dude2 wrote: ↑Thu Jan 27, 2022 10:34 amThe only concept that comes to mind is this notion that TIPS are a very small fraction of the investment grade bond market. From that perspective there just are not enough of them that exist to allow everyone to go 100% TIPS. Therefore, there's some sort of a theoretical line where demand for TIPS being greater than supply skews their value. For all I know, this may very well be a reality today. Only from that perspective, not from theory but from reality, would it make sense to vary one's fixed income holdings. If TIPS were ubiquitous, then no argument.dbr wrote: ↑Thu Jan 27, 2022 10:19 amI agree. It is a basic argument for why the TIPS (or I bond) allocation should be 100% of bonds. The idea that maybe over some period of time nominal bonds "beat" TIPS is really irrelevant when the issue is managing risk. There are a lot of tactics suggested in investing that ignore the point of risk. What risk is mitigated by not holding all of bonds in TIPS is a question.willthrill81 wrote: ↑Thu Jan 27, 2022 10:06 am Considering that inflation, especially unexpected inflation, has historically been the single biggest threat to bonds, it baffles me why an investor would not choose to protect against that risk with TIPS and/or I bonds if the cost for doing so was very small, which it arguably is.
The Sensible Steward
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Re: TIPS percentage in Bond allocation
Perhaps I wasn't clear. My point was that magnitude/beta for commodities is higher than TIPS, not the likelihood of movement/correlation. While TIPS can hedge the TIPS portion of your portfolio against inflation, because their magnitude/beta is lower than commodities, they do not provide as much protection against inflation for the non-TIPS portion of the portfolio. In contrast, commodities can provide inflation protection for the commodities allocation and, due to higher beta in response to inflation, also provide a hedge for the non-commodities portion. Arguably, commodities might trade at a premium relative to TIPS because of this beta, which would reduce the protection provided, but I haven't seen any research on that issue.gmaynardkrebs wrote: ↑Thu Jan 27, 2022 6:08 pmTIPS held to maturity have a correlation of 1 with inflation. The technical term for a correlation higher than 1 is "error."TurtleBeatsHare wrote: ↑Thu Jan 27, 2022 5:55 pm To the extent that you want an inflation hedge, my read of the evidence is that commodity indices perform better than TIPS because the magnitude of their correlation is higher than TIPS and because they are a more direct measure of inflation...
- FreddieFIRE
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Re: TIPS percentage in Bond allocation
I've done this for years. Last year it proved to be a particularly good approach.
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- gmaynardkrebs
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Re: TIPS percentage in Bond allocation
Are you saying that commodities "over-react" so to speak to inflation? And that hedges inflation risk in the non-TIPS portion of your portfolio? Interesting thought....TurtleBeatsHare wrote: ↑Fri Jan 28, 2022 12:24 pmPerhaps I wasn't clear. My point was that magnitude/beta for commodities is higher than TIPS, not the likelihood of movement/correlation. While TIPS can hedge the TIPS portion of your portfolio against inflation, because their magnitude/beta is lower than commodities, they do not provide as much protection against inflation for the non-TIPS portion of the portfolio. In contrast, commodities can provide inflation protection for the commodities allocation and, due to higher beta in response to inflation, also provide a hedge for the non-commodities portion. Arguably, commodities might trade at a premium relative to TIPS because of this beta, which would reduce the protection provided, but I haven't seen any research on that issue.gmaynardkrebs wrote: ↑Thu Jan 27, 2022 6:08 pmTIPS held to maturity have a correlation of 1 with inflation. The technical term for a correlation higher than 1 is "error."TurtleBeatsHare wrote: ↑Thu Jan 27, 2022 5:55 pm To the extent that you want an inflation hedge, my read of the evidence is that commodity indices perform better than TIPS because the magnitude of their correlation is higher than TIPS and because they are a more direct measure of inflation...
Re: TIPS percentage in Bond allocation
This line of thinking is more relevant when somebody like Vanguard (or the like) decides to drink the CoolAide and go 100% TIPS in their TR and LC funds. The scale there is what matters, and it is relevant.willthrill81 wrote: ↑Fri Jan 28, 2022 10:29 amWhether there are 'enough' TIPS to go all around is completely irrelevant for a retail investor today. Everyone on this forum could move all of their fixed income into TIPS, and it wouldn't move the needle. Despite TIPS only representing a small portion of the Treasury market, it's such a mind bogglingly huge market that it doesn't matter.Dude2 wrote: ↑Thu Jan 27, 2022 10:34 amThe only concept that comes to mind is this notion that TIPS are a very small fraction of the investment grade bond market. From that perspective there just are not enough of them that exist to allow everyone to go 100% TIPS. Therefore, there's some sort of a theoretical line where demand for TIPS being greater than supply skews their value. For all I know, this may very well be a reality today. Only from that perspective, not from theory but from reality, would it make sense to vary one's fixed income holdings. If TIPS were ubiquitous, then no argument.dbr wrote: ↑Thu Jan 27, 2022 10:19 amI agree. It is a basic argument for why the TIPS (or I bond) allocation should be 100% of bonds. The idea that maybe over some period of time nominal bonds "beat" TIPS is really irrelevant when the issue is managing risk. There are a lot of tactics suggested in investing that ignore the point of risk. What risk is mitigated by not holding all of bonds in TIPS is a question.willthrill81 wrote: ↑Thu Jan 27, 2022 10:06 am Considering that inflation, especially unexpected inflation, has historically been the single biggest threat to bonds, it baffles me why an investor would not choose to protect against that risk with TIPS and/or I bonds if the cost for doing so was very small, which it arguably is.
Then ’tis like the breath of an unfee’d lawyer.