Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Interesting Jason Zweig story in the Wall St. Journal weekend edition about TIPS. Now that the conventional wisdom is that inflation is dead there has been a selloff of TIPS. Perhaps a buying opportunity. Vanguard Inflation-Protected Secs Adm (VAIPX) mentioned. Anyone buying?
I don't follow the bond markets - so on thin ice here. Why are TIPS lagging (assuming your observation is correct)? Probably the same anti-inflation forces that seem to be hammering many commodities - most notably energy. I looked at PRITX and find it positive in recent years. Certainly ahead of what a money market fund would provide.
I think TIPS or TIPS funds are a decent long-term place to park cash. (This assumes a conservative fund with short-moderate duration.) But I also know that they are grossly misunderstood by many investors. They DO NOT protect you against inflation or potential losses to a bond portfolio during periods of rising rates. What they do do is mitigate the risks of inflation on a bond's value going forward. There's probably not enough experience to know how TIPS funds would fare in the event of sharply rising rates. However, with the "fickleness" of today's investing public, it's likely funds would experience significantly greater losses (due to outflows) than would holders of TIPS purchased directly.
What keeps me from moving my cash at Price to TIPS is the liquidity issue. I like to be able to use cash there to move in and out of other funds. There's a lot less restriction on trading in and out of cash accounts, like TRBUX, than for regular bond funds.
We have been in and out of TIPs fund over the past 6 years. Our most common funds (one's readily available to us) have been TIP, FINPX, ACITX, BPRIX and LTPZ. Although our Fidelity brokerage accounts allow just about any TIPs area we would choose to use.
This investment area wanders about, not unlike other bond and equity areas. We do use this area, from time to time, for "cash parking" versus a money market fund. If one desires more flexibility to sell these to move the monies to another area, an etf ( as with TIP ) might prove more valuable. Also note that not all active managed TIPs funds are equal. Some will hold a variety of short or longer term gov't. TIPs; as well as a mix of other investment grade corp. bonds within a fund or perhaps other Treasury issues. Although most TIPs total returns end with similar results over a long time frame. Also of note is that the TIPs area, not unlike other U.S. gov't. issues also represent an area during a flight to safety in the markets, to where safe haven monies will travel. Another circumstance, is that one may discover existing TIPs exposure within many bond funds. So, you may already have enough exposure; unless you choose to invest directly into this area, per your original question. If you have choices for TIPs within your investment account, I would suggest a review of LTPZ. This fund uses many tools to achieve returns, so this is not a plain jane TIPs fund and will also track long term bond pricing. For any TIPs funds, take a look at the overall longer term total returns. You will not win the race to short term results, but the returns shouldn't burn down your investment house either. As per the MFO disclaimer: "Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer." You could do much worse and holding TIPs depends upon your own philosophy, of course; and how such holdings fit into your own investment plan. Personally, we attempt to not invest less than 5% in a given area, considering that less than this percentage may not have any affect, good or bad; upon an overall portfolio. This doesn't mean that one can not dollar cost average into a position, but this is our own consideration and we generally take a 5% position in one big bite. We also have obtained this 5% position using more than one fund for the total value. The mix and match method. An example would be that we have held as much as 45% of our portfolio in high yield bond funds, using as many as 7 at one time to spread the manager(s) abilities/skills and take the average of results for the total return in this particular.
M* TIPs, active managedClick columns to sort for return by year period, as the list is set by alpha fund name. Note that the variance between these TIPs funds have a return spread for YTD of 2.45% from the best to the worst. "Holy spread", as Robin would express to Batman.
Lastly, most TIPs funds have been a happy area since the beginning of the year. But, this is also the case with many investment grade bond funds. This may not been the case in 3, 6 or 12 months. The markets are fickle, eh ??? Note: We are watching LTPZ, in particular; at this time.
I'm out of coffee and thoughts for the time being.
Catch made one point above. Investors might be surprised they already have exposure to TIPs in some of their bond funds. That is overlooked often I think.
Comments
I don't follow the bond markets - so on thin ice here. Why are TIPS lagging (assuming your observation is correct)? Probably the same anti-inflation forces that seem to be hammering many commodities - most notably energy. I looked at PRITX and find it positive in recent years. Certainly ahead of what a money market fund would provide.
I think TIPS or TIPS funds are a decent long-term place to park cash. (This assumes a conservative fund with short-moderate duration.) But I also know that they are grossly misunderstood by many investors. They DO NOT protect you against inflation or potential losses to a bond portfolio during periods of rising rates. What they do do is mitigate the risks of inflation on a bond's value going forward. There's probably not enough experience to know how TIPS funds would fare in the event of sharply rising rates. However, with the "fickleness" of today's investing public, it's likely funds would experience significantly greater losses (due to outflows) than would holders of TIPS purchased directly.
What keeps me from moving my cash at Price to TIPS is the liquidity issue. I like to be able to use cash there to move in and out of other funds. There's a lot less restriction on trading in and out of cash accounts, like TRBUX, than for regular bond funds.
We have been in and out of TIPs fund over the past 6 years. Our most common funds (one's readily available to us) have been TIP, FINPX, ACITX, BPRIX and LTPZ. Although our Fidelity brokerage accounts allow just about any TIPs area we would choose to use.
This investment area wanders about, not unlike other bond and equity areas. We do use this area, from time to time, for "cash parking" versus a money market fund. If one desires more flexibility to sell these to move the monies to another area, an etf ( as with TIP ) might prove more valuable.
Also note that not all active managed TIPs funds are equal. Some will hold a variety of short or longer term gov't. TIPs; as well as a mix of other investment grade corp. bonds within a fund or perhaps other Treasury issues. Although most TIPs total returns end with similar results over a long time frame.
Also of note is that the TIPs area, not unlike other U.S. gov't. issues also represent an area during a flight to safety in the markets, to where safe haven monies will travel.
Another circumstance, is that one may discover existing TIPs exposure within many bond funds. So, you may already have enough exposure; unless you choose to invest directly into this area, per your original question.
If you have choices for TIPs within your investment account, I would suggest a review of LTPZ. This fund uses many tools to achieve returns, so this is not a plain jane TIPs fund and will also track long term bond pricing.
For any TIPs funds, take a look at the overall longer term total returns. You will not win the race to short term results, but the returns shouldn't burn down your investment house either.
As per the MFO disclaimer: "Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer."
You could do much worse and holding TIPs depends upon your own philosophy, of course; and how such holdings fit into your own investment plan. Personally, we attempt to not invest less than 5% in a given area, considering that less than this percentage may not have any affect, good or bad; upon an overall portfolio. This doesn't mean that one can not dollar cost average into a position, but this is our own consideration and we generally take a 5% position in one big bite. We also have obtained this 5% position using more than one fund for the total value. The mix and match method. An example would be that we have held as much as 45% of our portfolio in high yield bond funds, using as many as 7 at one time to spread the manager(s) abilities/skills and take the average of results for the total return in this particular.
M* TIPs, active managed Click columns to sort for return by year period, as the list is set by alpha fund name. Note that the variance between these TIPs funds have a return spread for YTD of 2.45% from the best to the worst. "Holy spread", as Robin would express to Batman.
Lastly, most TIPs funds have been a happy area since the beginning of the year. But, this is also the case with many investment grade bond funds. This may not been the case in 3, 6 or 12 months. The markets are fickle, eh ??? Note: We are watching LTPZ, in particular; at this time.
I'm out of coffee and thoughts for the time being.
Take care,
Catch