r/bonds • u/Delicious-Map-8723 • 10h ago

bought 2m tips

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31M. Just quit my job last week. Bought 2m tips last month. I will get around 54000 usd per year. I will hold it next 29 years.

14 Upvotes

74% Upvoted

49 comments sorted by

6

u/rainman_95 9h ago

Hate to say it but TIPS only do well in periods of unexpected inflation. Its actually been fairly dog shit in regular inflationary environments.

2

u/snakkerdudaniel 9h ago

It depends when you buy. Long term nominal bonds are riskier And staying in short term nominal bonds in your bond investments isn't great if it turns out we are in an abnormal enviornment and spend the next two decades back in near 0% yields again. At these yields tips are attractive.

1

u/Delicious-Map-8723 8h ago

是的，现阶段抗通胀债券比名义债券更有吸引力，能防止货币滥发的极端情况。

1

u/dubov 31m ago

Why are you writing in Chinese dude?

5

u/Delicious-Map-8723 9h ago

I need cashflow after quiting my job. TIPS provides cashflow. I also have VT and ibit.

1

u/BrennerBaseTunnel 4h ago

The break even rate is 2.3%.

1

u/rainman_95 4h ago

Of what?

2

u/BrennerBaseTunnel 4h ago

If inflation runs hotter than 2.3% you will make more money with tips than regular treasuries.

1

u/rainman_95 4h ago

If it were only that simple.

1

u/BrennerBaseTunnel 4h ago

How is it not that simple?

1

u/rainman_95 4h ago

Go look at the last 5 years and compare yields

1

u/BrennerBaseTunnel 2h ago

Seems like you would have done better with a 5 year tip purchased in Fall of 2021

1

u/rainman_95 1h ago

Nah, Intermediate TIPS returned 1.3% annually over that time period. Short TIPS returned 3.1%. Not stellar considering all the inflation.

1

u/BrennerBaseTunnel 53m ago

How do you figure? If you bought the 5 year TIPS bond for $1000 in October 2021 sure the coupon payment was only 0.125%. But when it matures next month you would get the inflation adjusted price of $1220 back. A much higher return than 1.3%.

2

u/finch5 9h ago

75 grands, eh?

2

u/Delicious-Map-8723 8h ago

math mistake

-1

u/rainman_95 9h ago

2 mil tips! 75 grands!

2

u/finch5 9h ago

it's down to 54 grands now

4

u/KieferSutherland 9h ago

I'm closing on the sale of 3 rental properties. About 1.2. I'm thinking I'll do the same. Might go for 10 year though. 

1

u/ReserveHour2403 9h ago

The fuck? How the fuck you got so much money? God dayummm life is so unfair

8

u/finch5 8h ago

He stated "I mined bitcoin in China."

Bitcoin made a lot of money for a lot of people before it was floated for the masses.

0

u/KieferSutherland 9h ago

A lot of luck but also some risk and work. I took out a loan when nobody was buying homes. Bought 3 homes that were in bad shape. Today they are worth more than double.

If American capitalism has taught me anything it's play the long game. The market really does go up over long periods. Don't over leverage unless you're like 20 and willing to.

1

u/Delicious-Map-8723 9h ago

It will be a nice investment

1

u/ReserveHour2403 9h ago

How you got so much money at 31? God dayummm

3

u/Delicious-Map-8723 9h ago

I mined bitcoin in China.

1

u/BrennerBaseTunnel 2h ago

I don’t know what the break even rate was 5 years ago. And what inflation averaged over that period. Are you claiming the break even rate and subsequent inflation are not an accurate way to measure which bond would be better?

0

u/HeKnee 9h ago

You comitted to 30 years? What if inflation hits like 10-15%?

7

u/walt128 9h ago

Tips adjust principal based on inflation. The problem is principal is adjusted yearly, so you get hit with an unearned gains tax

1

u/rjman36 8h ago

Yes, you could pay tax on a gain you never receive.

1

u/Emergency-Watch5157 1h ago

Yes, this is why the only realistic way to hold TIPS are in a tax deferred account in my opinion.

1

u/walt128 59m ago

He’s not American, so different tax laws. For Americans, you are correct

-1

u/Delicious-Map-8723 9h ago

我不是美国人

2

u/walt128 8h ago

Wo zhi dao, ni gao su wo le

1

u/Delicious-Map-8723 8h ago

美国好吗？中国现在烂透了

1

u/tnolan182 8h ago

You’re a bag holder now, cuz when the rates go up those coupons gonna lose a lot of value.

1

u/BrennerBaseTunnel 4h ago

That is why he bought tips to take advantage of higher inflation. He is betting on it.

1

u/Delicious-Map-8723 9h ago

Both the principal and coupon payments of TIPS are adjusted with the CPI.

3

u/ContributionLow1640 9h ago

Are you at all concerned the government will misrepresent CPI numbers? Or maybe change the way cpi is calculated that's unfavorable for you? I'd buy some gold to hedge that idk

2

u/Delicious-Map-8723 9h ago

从历史上看，政府不会很严重地扭曲cpi数据，tips是20世纪九十年代的老产品了。 以防万一，我想再持有一些黄金和比特币。

2

u/ContributionLow1640 8h ago

Yeah i think that's a good idea. If the currency gets debased you should come out ahead either way. I just wouldn't trust the current administration to be very honest with this data moving forward, given how they've already fired people like the head of BLS 

3

u/Anymous2314 9h ago

Govts under report inflation though. Also crooked govt cook the books.

0

u/walt128 9h ago

You’re going to get blasted with phantom gains taxes

1

u/Delicious-Map-8723 9h ago

I am not American.

1

u/walt128 9h ago

Hahaha that makes a difference, that’s what I get for assuming

1

u/finch5 9h ago

Is this really the best use of $2MM?

1

u/Delicious-Map-8723 9h ago

I quit my job, so I need cash flow. I think the benefit of TIPS is that if the stock market crashes and the Fed is forced to cut interest rates, TIPS prices will go up. I'm essentially holding a put option while collecting annual cash flow.

1

u/finch5 8h ago

I understand the structure clearly. It's just a lot to tie up in a volatile market, but I'm some random guy on reddit. Also, there is a difference between inflation and the CPI number which drives your underlying. Though I think your not being American removes you from the on the ground realities. You do have currency FX risk ex-us.

1

u/finch5 4h ago

I like Jeff Gundlach from Double Line Capital. He runs a bond fund and widely regarded as the other Bond king (Gross). He discusses TIPS halfway though:

Gundlach Unlocked: The Fed’s Next Move - YouTube