It would only be an issue with ladder if it was still being assembled during a liquidity stress event or if somebody wanted to sell rungs before they mature during such an event.Are you talking about TIPS or TIPS mutual funds? I ask because with laddered TIPS you are at least attempting to only use (spend) the interest payments and the maturing issues so I am missing how liquidity would be problematic in that scenario.Great write up. I recall you’ve written on this forum about an issue you had with TIPS back during 2008-2009. Something about them not being liquid enough and also did not behave as you expected. And just when you’d want the safety, they were not as reliable. I am not sure if TIPS are truly “battle tested.” Can you expand on what you’ve discussed on that in the past? I do not remember exactly what you were saying.MUST-have is too strong. Let's say "No-brainer" and "Can't-think-of-any-reason-NOT-to-have."
My first purchase of TIPS was in 1998. They've always seemed like no-brainer to me. Just as with index funds and series I savings bonds, there isn't much profit in them for Wall Street and I believe there was always a steady drip of anti-TIPS propaganda until 2022. You just didn't hear much about them--except here in the forum. There were even jokes about "TIPS 24x7" in the forum, and, conversely, someone joked that "TIPS" was an acronym for "The Investment Professionals Shun."
Stock fans hate 'em because they complicate the story that "you MUST have stocks to keep up with inflation." Gold fans hate 'em because they complicate the story that "You MUST have gold to keep up with inflation." Government-haters hate 'em because they aren't the product of the free market and they rely on the integrity of the Bureau of Labor Statistics.
I've never had all of my fixed income in TIPS, mostly because 100%-anything seems extreme, but I did start using the TIAA-CREF Inflation-Linked Bond Account as soon as it was available. I kept adding to a portfolio of individual TIPS until about 2012, then threw in the towel on managing that and exchanged them for the Vanguard Inflation-Protected Bond Fund, VIPSX. By then, TIPS were about half of my marketable fixed income holdings. I kept saying stuff like "if I had the courage of my convictions I'd put all of my fixed income in TIPS," because I honestly don't see any good reasons not to; I'm now at about two-thirds TIPS, one-third Total Bond.
But MUST have? No.
For one thing, I don't think the exact composition of the bond holdings matter much in any portfolio with a "normal" amount of stocks. Here's a comparison of a backtest of a Bogleheads Three-fund Portfolio of 42% US stocks, 18% international stocks, and 40% bonds, one using Total Bond and the other using Inflation-Protected Securities. The point here is simply that it wouldn't have made much difference.
Source
When folks discuss bonds it would be helpful if the are explicit about the form in which they hold them and for what purpose.
Cheers
Statistics: Posted by dcabler — Fri Oct 04, 2024 7:57 pm — Replies 34 — Views 1910