Several fund families (like Fidelity, Vanguard, T. Rowe Price) and ETF's (like iShares) have an easy way to invest in Treasury Inflation-Protected Securities (TIPS). If you have gone through the exercise to determine your risk tolerance and your time horizon and know that these are right for you then next is understanding the rates.
Short-term investment asset class returns are based on a historical risk premium added to an inflation rate, which is calculated by subtracting the TIPS (Treasury Inflation Protected Securities) yield from the 10-year Treasury yield. This method results in an appropriate estimate of the market inflation rate for the next 10 years.
10-year Treasury Yield: Answer:______ (go to www.bankrate.com to get the rate)
Then subtract, TIPS Yield: Answer: ______ (go to wwwbankrate.com to get this rate, too)
Your answer, which is ever-changing, is the suggested Inflation Rate. If this rate comes out to be higher than what you believe inflation will be for you (yes, your personal inflation rate is more important anyway), then buying TIPS will keep you a little ahead of inflation. See my "Portfolio-Allocation" label for more thoughts on allocations.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.