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Time to Add Some TIPS

Posted By Madison On April 8, 2010 @ 8:17 am In Roundups | No Comments

When I decided to make our Asset Allocation Update to Include More International Exposure [1] I spent a lot of time reevaluating our entire portfolio.

Currently our non stock holdings are split between cash and the total bond market. The cash is actually in CD Ladders [2], but I’ve found the ladders renewing at such low rates, that I’m tempted to rethink that strategy.

I first considered the Ally Bank [3] 5 year CD strategy with low early withdrawal penalties, before researching TIPS.

Treasury Inflation Protected Securities

A lot of my research and reading on treasury inflation protected securities (TIPS) started with the academic papers on the inflation-protected securities (TIPS) [4] site on Bogleheads (one of my favorite investing forums).

The rationale behind including TIPS as part of the bond holding is for inflation protection. Here is a more detailed description from the Boglehead wiki:

Because unexpected inflation is the biggest enemy of fixed income securities and because TIPS offer unique inflation protection, investors should consider including TIPS in their investment portfolio.

Adding TIPS

I decided that I still plan to hold 12% in non-stock holdings, but I’ll be splitting it 50/50 between the total bond index and TIPS.

Of course it complicates things somewhat with trying to include the new emerging market ETF, but I think I found a way to make it work.

Another alternative to TIPS are I bonds, which you can now Use Your Tax Refund to Purchase I Bonds [5].

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URL to article: http://www.mydollarplan.com/time-to-add-some-tips/

URLs in this post:

[1] Asset Allocation Update to Include More International Exposure: http://www.mydollarplan.com/asset-allocation/

[2] CD Ladders: http://www.mydollarplan.com/create-cd-ladders/

[3] Ally Bank: http://www.mydollarplan.com/go/AllyBank/

[4] inflation-protected securities (TIPS): http://www.bogleheads.org/wiki/Treasury_Inflation_Protected_Securities

[5] Use Your Tax Refund to Purchase I Bonds: http://www.mydollarplan.com/use-your-tax-refund-to-purchase-i-bonds/

[6] How To Select a Guardian for Your Children: http://www.goodfinancialcents.com/how-to-select-a-guardian-for-your-children/

[7] How Big is Your Financial Safety Net?: http://www.milliondollarjourney.com/how-big-is-your-financial-safety-net.htm

[8] Calculate How Much Your Debt Costs You Per Month: http://www.getrichslowly.org/blog/2010/04/06/calculate-how-much-your-debt-costs-you-per-month/

[9] Tips for Selling a Home in a Down Market: http://frugaldad.com/2010/04/05/tips-for-selling-a-home-in-a-down-market/

[10] How to Avoid the Next Real Estate Bubble: http://genxfinance.com/2010/04/05/how-to-avoid-the-next-real-estate-bubble/

[11] Missed Mortgage Payment: http://moneysmartlife.com/missed-mortgage-payment/

[12] 3 Disadvantages of Ready Made Meals and TV Dinners: http://www.thedigeratilife.com/blog/ready-made-meals-tv-dinners/

[13] 5 Tips to Make Your Home Seem Bigger: http://www.thesunsfinancialdiary.com/personal-finance/5-tips-home-bigger/

[14] Win $500: http://www.simplycontests.com/daily-entry-sweepstakes/win-500-3/

[15] A Dead Simple Alternative to CD Laddering: http://www.doughroller.net/banking/dead-simple-alternative-cd-laddering/

[16] Capitalizing on Free Birthday Food?: http://www.lazymanandmoney.com/capitalizing-on-free-birthday-food/

[17] Learning How to Let Go of Clutter: http://www.bripblap.com/2010/learning-how-to-let-go-of-clutter/

[18] Ways for Kids to Make Money: http://kidmoney.about.com/b/2010/03/31/ways-for-kids-to-make-money.htm

[19] Carnival of Personal Finance: http://www.mightybargainhunter.com/2010/04/05/unanswered-questions-cash-commons/

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