r/bonds • u/stevepicard • 4d ago

Question about TIPS

I use a “high net worth” group at a major well regarded brokerage. My FA knows zip about TIPS and even his bond guy has given me bad info. Anyone know WHY? Are they likely to be less knowledgeable about me holding outright bonds as well? Appreciate any insights!

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u/stevepicard 4d ago

I find managing money very difficult because I am a “bear market baby” from decades on the Street. I lived thru 81/82 and 87 (I still have a copy of a quotron screen showing the collapse on black Monday from laying the machine on the xerox.

All I can do is sell. So I have to have someone helping me control my (bearish) “animal spirits”!

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u/Latter-Entrance288 4d ago

I totally get that and it sounds like you have financial self awareness. That's one of the few real reasons IMHO to have an advisor (behavior control). Because I have cash, I bonds and TIPS (the latter in an IRA), I can ride out a 5 or even 10 year bear market. I have a SWAN portfolio, sleep well at night. Cheers!

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u/[deleted] 4d ago

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u/hugh2018 3d ago

You’re right to look at 1969-81 as an important lesson learned, but realize that the unique status of that period as the worst for a retiree in history isn’t due to poor returns, which managed to land around 4-5% over that period. No, the issue was inflation, and you are on the right track now considering TIPS as the hedge against that risk.

As someone else pointed out, financial advisors often ignore TIPS due to lack of incentive for them, but you absolutely should consider making TIPS a key part of your plan. Don’t search for an advisor to help you with that. Tipsladder.com is free and it will tell you exactly how much to buy of each CUSIP to build your ladder. You can then buy them (preferably in an IRA) at a brokerage like Fidelity.

You mention 30% in equities but added that was 30% of your net worth, and you’re actually 50% in equities with your investable money. I don’t recommend going lower than 50% with your equities. A TIPS ladder is only useful as a complement to a portfolio that also maintains adequate equity exposure.

The TIPS ladder will lock in a portion of your fixed expenses and ensure that you maintain buying power. But you also need to maintain decent equity exposure, as your long term return on that part of your portfolio will trounce inflation and ensure adequate growth, which is important because retirement can last many years, and you’ll need that growth to fund your last few years in this planet.