Comments on: TIPS for Beating Inflation http://www.mint.com/blog/investing/tips-for-beating-inflation/ The blog of the free, simple personal finance solution. Track all your spending automatically, find the best deals, save more money. And save the world. Sat, 11 Feb 2012 21:46:28 +0000 hourly 1 http://wordpress.org/?v=3.1.3 By: PPao http://www.mint.com/blog/investing/tips-for-beating-inflation/comment-page-1/#comment-47322 PPao Sat, 03 Apr 2010 04:17:24 +0000 http://www.mint.com/blog/?p=8434#comment-47322 I was wondering if someone may answer this boggling question. I understand how TIPS work although what I don't understand is the correlation of and how it moves. When interest rates were near zero I suppose TIPS went up due to the spook of inflation later on down the road [years] - so it was projecting the future of inflation within its up movement. Now there are talks that the Fed are looking to raise rates in the several months ahead to a year from now to maintain inflation which would be negative for bonds. I guess my question is, will TIPS continue to move a long side the release of the monthly CPIs regardless of interest rates or has that been priced in already and that when interest rates rise TIPS will fall? I was wondering if someone may answer this boggling question. I understand how TIPS work although what I don’t understand is the correlation of and how it moves. When interest rates were near zero I suppose TIPS went up due to the spook of inflation later on down the road [years] – so it was projecting the future of inflation within its up movement. Now there are talks that the Fed are looking to raise rates in the several months ahead to a year from now to maintain inflation which would be negative for bonds. I guess my question is, will TIPS continue to move a long side the release of the monthly CPIs regardless of interest rates or has that been priced in already and that when interest rates rise TIPS will fall? ]]> By: Jeff B http://www.mint.com/blog/investing/tips-for-beating-inflation/comment-page-1/#comment-47087 Jeff B Wed, 31 Mar 2010 15:23:54 +0000 http://www.mint.com/blog/?p=8434#comment-47087 There is no inflation right now, so TIPS seems to be a waste of money to me. Short term bonds are they way to go if you want bonds. LT bonds are going to get killed when interest rates start to go up. There is no inflation right now, so TIPS seems to be a waste of money to me. Short term bonds are they way to go if you want bonds. LT bonds are going to get killed when interest rates start to go up. ]]> By: Tim http://www.mint.com/blog/investing/tips-for-beating-inflation/comment-page-1/#comment-46613 Tim Sat, 20 Mar 2010 23:25:47 +0000 http://www.mint.com/blog/?p=8434#comment-46613 Overall, I agree that when inflation hits us, at some point with all the money pumped into our economy, it's going to erode savings and accounts. And TIP-like strategies will work. Another is writing (selling) covered calls against stocks that you own. The call option sold, by definition, is inflation adjusted! So you automatically get the bump. And if you are nailing 3% to 4% monthy, completely possible with limited risk using collar trades, you are getting an inflation-adjusted 60% a year. Overall, I agree that when inflation hits us, at some point with all the money pumped into our economy, it’s going to erode savings and accounts. And TIP-like strategies will work.

Another is writing (selling) covered calls against stocks that you own. The call option sold, by definition, is inflation adjusted! So you automatically get the bump. And if you are nailing 3% to 4% monthy, completely possible with limited risk using collar trades, you are getting an inflation-adjusted 60% a year.

]]> By: Matthew Amster-Burton http://www.mint.com/blog/investing/tips-for-beating-inflation/comment-page-1/#comment-45996 Matthew Amster-Burton Fri, 26 Feb 2010 23:39:47 +0000 http://www.mint.com/blog/?p=8434#comment-45996 Hans, TIPS earning are taxed as interest income. They really need to be put in a tax-deferred account like an IRA, or you'll pay tax every year on the inflation adjustment, even though you don't actually receive it in cash until the bond matures. I-Bonds are tax-deferred by nature. Hans, TIPS earning are taxed as interest income. They really need to be put in a tax-deferred account like an IRA, or you’ll pay tax every year on the inflation adjustment, even though you don’t actually receive it in cash until the bond matures.

I-Bonds are tax-deferred by nature.

]]> By: Toni J http://www.mint.com/blog/investing/tips-for-beating-inflation/comment-page-1/#comment-45985 Toni J Fri, 26 Feb 2010 17:16:25 +0000 http://www.mint.com/blog/?p=8434#comment-45985 I have purchased many TIPS, I-bonds, and (gasp!) EE bonds over the years, and I am thankful every day that I did so. The yield on some of my EE bonds--the ultimate "Grandma investment"--is currently over 8%, and the interest is tax-deferred to boot. I also purchased a sizable amount of TIPS in 2001, which yield 3.5% plus the inflation rate. As of this January, the principal amount has also increased 24% in nine years. Highly preferable than the 10-year return of the S&P 500, which was DOWN .949% as of November 2009 (http://www2.standardandpoors.com/spf/pdf/index/tr.pdf). My spouse and I largely adhere to the 90/10 rule referenced above, and it has served us quite well. I am unclear as to where the "conventional wisdom on retirement savings" age-based rule originated, but I am highly suspicious it can be traced to the marketing department of Fidelity, Vanguard, T. Rowe Price,...in other words, it is an artificial construct, not based on valid research. I have purchased many TIPS, I-bonds, and (gasp!) EE bonds over the years, and I am thankful every day that I did so. The yield on some of my EE bonds–the ultimate “Grandma investment”–is currently over 8%, and the interest is tax-deferred to boot. I also purchased a sizable amount of TIPS in 2001, which yield 3.5% plus the inflation rate. As of this January, the principal amount has also increased 24% in nine years. Highly preferable than the 10-year return of the S&P 500, which was DOWN .949% as of November 2009 (http://www2.standardandpoors.com/spf/pdf/index/tr.pdf).

My spouse and I largely adhere to the 90/10 rule referenced above, and it has served us quite well. I am unclear as to where the “conventional wisdom on retirement savings” age-based rule originated, but I am highly suspicious it can be traced to the marketing department of Fidelity, Vanguard, T. Rowe Price,…in other words, it is an artificial construct, not based on valid research.

]]> By: Rin.J http://www.mint.com/blog/investing/tips-for-beating-inflation/comment-page-1/#comment-45972 Rin.J Fri, 26 Feb 2010 05:17:08 +0000 http://www.mint.com/blog/?p=8434#comment-45972 the TIPS is quite nice to counteract the inflation for the purchasing power is more and more important than so-call interest rate or currency exchange rate. However, it's just a kind of conservative tool. It's a part of the personal financial portfolio and we should find other useful tools to support us together with it . haha the TIPS is quite nice to counteract the inflation for the purchasing power is more and more important than so-call interest rate or currency exchange rate. However, it’s just a kind of conservative tool. It’s a part of the personal financial portfolio and we should find other useful tools to support us together with it . haha ]]> By: Hans Wurst http://www.mint.com/blog/investing/tips-for-beating-inflation/comment-page-1/#comment-45954 Hans Wurst Thu, 25 Feb 2010 21:30:49 +0000 http://www.mint.com/blog/?p=8434#comment-45954 Will you have to pay taxes on the capital gain? Will you have to pay taxes on the capital gain? ]]> By: Hunter http://www.mint.com/blog/investing/tips-for-beating-inflation/comment-page-1/#comment-45952 Hunter Thu, 25 Feb 2010 21:13:27 +0000 http://www.mint.com/blog/?p=8434#comment-45952 I like the idea of investing in TIPS bonds. I like the idea of investing in TIPS bonds. ]]> By: PaulK http://www.mint.com/blog/investing/tips-for-beating-inflation/comment-page-1/#comment-45951 PaulK Thu, 25 Feb 2010 21:09:32 +0000 http://www.mint.com/blog/?p=8434#comment-45951 I have TIPS, it is a slice of my portfolio. Frankly, it pays every month, it doesn't do crazy dips, and unlike gold ETF's (like GLD, which I also have) and many stocks it PAYS EVERY MONTH lol. I have TIPS, it is a slice of my portfolio. Frankly, it pays every month, it doesn’t do crazy dips, and unlike gold ETF’s (like GLD, which I also have) and many stocks it PAYS EVERY MONTH lol. ]]> By: Matt http://www.mint.com/blog/investing/tips-for-beating-inflation/comment-page-1/#comment-45948 Matt Thu, 25 Feb 2010 20:32:01 +0000 http://www.mint.com/blog/?p=8434#comment-45948 Just here to represent Tacoma! Just here to represent Tacoma! ]]>