@jkandell Getting a little off topic but checkout my June 7, 2025 3:31 pm post on the Bond & Bond Funds thread. Would going more into US Treasuries help with your safety tilt?
Here are a couple of links about TIPs:
Hampton: What type of investor should consider adding TIPS ETFs to their portfolio?
Sotiroff: So again, it’s a Treasury bond, right? So, that first question is: Do you want some sort of safe harbor for your assets, right? Again, it’s more of the retirees, maybe the capital preservation, or maybe if you’re saving up for something and you’re young. You’re saving up for a down payment on a house and you want to preserve your money. And then it gets back to the inflation-expectation component of this, right? So, when you look at TIPS bonds, there is an inflation expectation that’s baked into them. Right now, it’s around 2.3% if you look at the breakeven inflation rate, and that’s over the next 10 years at an annualized rate. If inflation comes in higher than that 2.3% that’s quoted today, the TIPS is going to return commensurately higher than that. And you would be better off holding the TIPS bond than, say, the equivalent Treasury bond. If inflation comes in lower than that, you are probably going to be better off holding the Treasury bond.
So, the way I think about this is, if you look at something like the target-date funds that have these glide paths, usually what you see happening toward the end of those is like the investors getting into like their 50s and 60s, that’s when you start to see TIPS starting to be folded into the glide path. But they never go all-in on TIPS. They usually have some component of other bonds, just normal Treasury bonds, corporate bonds, and some element of TIPS, and that’s because we don’t really know which direction inflation’s going to go relative to expectations, right? So, from that perspective, it’s useful to maybe have a mix of both TIPS and maybe some regular bonds as well, just because you don’t know what’s going to happen with inflation.
https://www.morningstar.com/funds/worried-about-inflation-what-know-before-buying-tips-etfs-2
Inflation has proven to be a bit stickier than initially expected, and there are concerns that policy proposals from the incoming Trump administration—like tariffs, tax cuts, and immigration changes—could be inflationary, as well.
Treasury Inflation-Protected Securities, or TIPS, can help protect against inflation since their principal values are indexed to the Consumer Price Index (CPI). When considering TIPS, however, it's important to understand their unique characteristics and complex nature. In this article, we'll cover TIPS' key characteristics, and then focus on three key considerations for investors today:
- Positive "real" yields
- Breakeven rates that are below the current level of inflation, and
- Why TIPS can protect against inflation over the long run, but shouldn't be considered a short-term inflation "hedge."
https://www.schwab.com/learn/story/tips-and-inflation-what-to-know-now
Just read the book "Coming Into View: How AI and Other Megatrends Will Shape Your Investments" by Joseph H. Davis 2025. Mr. Davis is Vanguard's Global Chief Economist. From his book:
"The balanced 60/40 portfolio has endured for more than a century, weathering wars, recessions, and bubbles. Its resilience lies in its elegant simplicity-a diversified mix of stock and bonds that captures capital appreciation and income while mitigating risk. As we navigate the decades ahead, the tug-of-war between AI and fiscal deficits will present new challenges and opportunities. But the principles that have guided balanced investing - diversification, discipline, value - will endure."
His basic premise is that AI will either be a good thing for the economy, or it won't. Talk about going out on a ledge 😶. In order to cover either outcome, he tweaks the 60/40 asset allocation to the following:
US Broad Stock Market 25-30%
US Value 15-20%
US Growth 0%
Global ex-US (International) 10-20%
US Government Bonds 15-20%
US Corporate Bonds 20-30%
US Broad Taxable Bond Market 0-10%
All in Total Passive (Index ETFs)
That's it. Don't bother buying this book. Get it from your local library if they have it.
Interestingly, he adds a last chapter in which he advocates for Active Management if you want to increase your rate of return. Odd coming from Vanguard.
Interestingly, he adds a last chapter in which he advocates for Active Management if you want to increase your rate of return. Odd coming from Vanguard.
Although Vanguard started mass index investing, John Bogle was never against active funds per se, and Vanguard has always had them. Bogle's view was that active funds can be fine if they have low expense ratios. Their flagship Wellington fund is a great example, in existence since the 1920s.
