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Thanks, Ted. I moved out of TIPS because I didn't see it was doing much of anything. I bought a little DWX, SPDR S&P Int'l Dividend and VGK, Vanguard European with the proceeds, both paying about 4%--------further diversification.
Like I have disclosed before I own VIPSX. Almost 3 years now. I have been and will always remain "bond" challenged. I mean all kinds of bonds. More than equity investing, I think active management in bond investing is far more important.
"Duration" and "Maturity" are two words I understand very well in real life, but not in bond investing. If I'm investing in a bond fund I expect my manager to not just understand but also show "Durability" and "Maturity" to earn me more than what I would earn in an interest bearing bank account (which at this time is pretty much nothing). And for that I take on a degree of "manager risk" instead of "market risk".
What I have never been able to understand is how certain people decide to buy single country funds or decide to buy short term bonds instead of long term bonds. I thought we buy funds so we DON'T have to make decisions. ETFs are to me just like stocks in that they are not actively managed (thought I hear rumors there are some of that kind). When we buy ETFs are we now not managing our money instead of letting manager do that. If I was that smart (like my brother tells me I should be), I will buy individual securities myself (like he does) and not funds (like he does not).
LOL. There is nothing wrong with anything when you know what you are doing. Clearly you made my point.
If I understand correctly, a bond bought and held to maturity through all its up and down "guarantees" (unless there is a default) the principle + the interest. If one is prepared to do that, one will go in with the wherewithal to hold the bond through thick and thin. If we try buy/sell bonds actively and do so at wrong time, we may get sandbagged.
We buy a bond fund so manager with the expectation that he will do the buying and selling at right time and hope other investors don't panic so he can do the right thing at the right time.
The sort of article posted above is only relevant if someone is buying individual TIPs. The fact that SOMEONE is actually buying these TIPs indicates there is a reason, else WTF would anyone buy them. No security will exist if there is no demand for it. Now if you simply bought a fund, then you let the manager decide which to buy and which to leave alone.
I had mentioned this during the FundAlarm days. I told people that I earn 4% in a high interest rate FDIC insured checking account upto 25K. Most people asked me to "prove" I was actually earning that much interest. Or found other ways to discourage discussion citing the "pain" of having to make 10 or 15 transactions on the account to earn said interest rate.
I urge people to look at their local state community banks who offer high interest rate checking accounts. They will typically make you do certain number of dedit card transactions and / or a ACH deposit and / or a online bill pay. THAT is how they earn some commissions and in turn pay you a higher interest rate. Not to mention their CEOs don't make gazillion dollars in bonuses.
I hope this time at least I don't get flames saying what I'm saying is a bad idea. I call it cash in the bank. Without pain there is no gain. I have lunch every day at the company cafeteria. Either I pay cash or I pay by card. I eat lunch at least 15 times a month and if that's called "pain" to get 4% interest, then I'm a very "painful" person. What I call it is FREE LUNCH. No really, just compute monthly interest on 25K at 4% APR.
I was reasponding to the subject of this post "Holding TIPS Will Make You Poorer" It was clearly a poor subject matter by someone who follows what the media is saying.
Comments
"Duration" and "Maturity" are two words I understand very well in real life, but not in bond investing. If I'm investing in a bond fund I expect my manager to not just understand but also show "Durability" and "Maturity" to earn me more than what I would earn in an interest bearing bank account (which at this time is pretty much nothing). And for that I take on a degree of "manager risk" instead of "market risk".
What I have never been able to understand is how certain people decide to buy single country funds or decide to buy short term bonds instead of long term bonds. I thought we buy funds so we DON'T have to make decisions. ETFs are to me just like stocks in that they are not actively managed (thought I hear rumors there are some of that kind). When we buy ETFs are we now not managing our money instead of letting manager do that. If I was that smart (like my brother tells me I should be), I will buy individual securities myself (like he does) and not funds (like he does not).
To each his own.
My TIP etf is 2.24 years bought 5000 and now 5558.= annualized 8.37%
Individual tip bonds are
1.75 years old bought 10,173 now 11,974.= annualized 9.6%
2 years old bought 10,516 now 12533 - annualized - 8.5%
current 1-2 yrs CDs/MMs only yielding 1s-2s%
unless you look at these vehicles
http://www.money-rates.com/rewardschecking.htm
If I understand correctly, a bond bought and held to maturity through all its up and down "guarantees" (unless there is a default) the principle + the interest. If one is prepared to do that, one will go in with the wherewithal to hold the bond through thick and thin. If we try buy/sell bonds actively and do so at wrong time, we may get sandbagged.
We buy a bond fund so manager with the expectation that he will do the buying and selling at right time and hope other investors don't panic so he can do the right thing at the right time.
The sort of article posted above is only relevant if someone is buying individual TIPs. The fact that SOMEONE is actually buying these TIPs indicates there is a reason, else WTF would anyone buy them. No security will exist if there is no demand for it. Now if you simply bought a fund, then you let the manager decide which to buy and which to leave alone.
I urge people to look at their local state community banks who offer high interest rate checking accounts. They will typically make you do certain number of dedit card transactions and / or a ACH deposit and / or a online bill pay. THAT is how they earn some commissions and in turn pay you a higher interest rate. Not to mention their CEOs don't make gazillion dollars in bonuses.
I hope this time at least I don't get flames saying what I'm saying is a bad idea. I call it cash in the bank. Without pain there is no gain. I have lunch every day at the company cafeteria. Either I pay cash or I pay by card. I eat lunch at least 15 times a month and if that's called "pain" to get 4% interest, then I'm a very "painful" person. What I call it is FREE LUNCH. No really, just compute monthly interest on 25K at 4% APR.
It was clearly a poor subject matter by someone who follows what the media is saying.