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Inflation-Proofing Your Portfolio? Then Worry About This
FYI: With U.S. gasoline selling under $2 a gallon, food prices relatively flat and Wall Street bond traders betting on 1.5 percent annual inflation as far the eye can see, it may seem like the wrong time to worry about rising consumer prices.
TIPS are perhaps the worst investment of all time. Sure the interest return rises with inflation, BUT the price will fall with rising rates just like any other bond. Nothing like a "safe" bond fund with an avg return of sub 2% over the past 5 years. Yes, you can make money trading these if you guess right twice (in and out), just like any other trade of a dog. I know many disagree with my sentiments. So be it.
Gas in my area is back up to $2.00 range, from $1.76 just a couple months ago. That's about a 12% increase in such a short time. Food has been going up for the last year or 2.
There is a time when TIPs will be dogs and there is a time when they will do quite well. I think we may be getting to the quite well place. If oil continues to rise as it has been lately, inflation could surprise. I'm thinking of buying a tips fund.
If that's your outlook, why not something like HAP? That's something that will do well in an inflation scenario, real or perceived. I believe the last time there was an inflation scare was 2013. That year AGG down 1.98%, VIPSX DOWN 8.2%; HAP up 6.1%.
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There is a time when TIPs will be dogs and there is a time when they will do quite well. I think we may be getting to the quite well place. If oil continues to rise as it has been lately, inflation could surprise. I'm thinking of buying a tips fund.