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TIPS Funds

 

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TIPS (Treasury Inflation Protected Securities) are bonds issued by the US government whose yields are linked to inflation.  TIPS are attractive as diversifiers: they tend to have low correlations with other asset classes.  For more information about TIPS, see here.

There are several very similar investment options available.  Which is best?

The funds are listed in rough order of our overall preference.

Preferences are listed separately for use in retirement accounts and for taxable accounts.

For a listing of our preferences in other asset classes, see here.

Retirement Accounts (i.e., tax-deferred or tax-exempt accounts)

bulletVanguard Inflation Protected Securities Fund Admiral Shares (VAIPX).  E/R: 0.10%.  This fund invests in TIPS.

bulletFidelity Spartan Inflation-Protected Bond Index Fund Fidelity Advantage Class (FSIYX).  E/R: 0.10%.  Minimum initial investment = $100,000.  This fund tracks the Barclays U.S. Treasury Inflation-Protected Securities (TIPS) Index.

bulletDFA Inflation-Protected Securities Portfolio (DIPSX).  E/R: 0.12%.  This fund buys TIPS with maturities of five to twenty years.

bulletSchwab US TIPS ETF (SCHP).  E/R: 0.07%.  This ETF tracks the Barclay's US Government Inflation-Linked Index.  For more information on ETFs, see here.

bulletDFA LTIP Portfolio (DRXIX).  E/R: 0.15%.  This fund buys TIPS with greater than 20 year maturities.  The longer duration should amplify the diversification benefit of this fund (i.e., it should decrease correlation with other asset classes).

bulletPIMCO 15+ Year U.S. TIPS Index Fund (LTPZ).  E/R: 0.20%.  This ETF tracks the Merrill Lynch 15+ Year US Inflation-Linked Treasury Index of long-term TIPS.  The longer duration should amplify the diversification benefit of this fund (i.e., it should decrease correlation with other asset classes).  For more information on ETFs, see here.
 
bulletSPDR Barclays TIPS ETF (IPE).  E/R: 0.1845%.  This ETF tracks the Barclay's US Government Inflation-Linked Index.  For more information on ETFs, see here.

bulletFidelity Spartan Inflation-Protected Bond Index Fund Investor Class (FSIQX).  E/R: 0.20%.  Minimum initial investment = $10,000.  This fund tracks the Barclays U.S. Treasury Inflation-Protected Securities (TIPS) Index.

bulletVanguard Inflation Protected Securities Fund (VIPSX).  E/R: 0.20%.  This fund invests in TIPS.

bulletiShares Barclays US TIPS Fund (TIP).  E/R: 0.20%.  This ETF tracks the Barclays US Treasury Inflation Bond Index.  For more information on ETFs, see here.

bulletPIMCO Broad U.S. TIPS Index Fund (TIPZ).  E/R: 0.20%.  This ETF tracks the Merrill Lynch US Inflation-Linked Treasury Index.  For more information on ETFs, see here.
 
bulletPIMCO 1-5 Year U.S. TIPS Index Fund (STPZ).  E/R: 0.20%.  This ETF tracks the Merrill Lynch 1-5 Year US Inflation-Linked Treasury Index of short-term TIPS.  For more information on ETFs, see here.

Taxable Accounts

bulletDFA Municipal Real Return Portfolio (DMREX).  E/R: 0.27%.  This fund buys zero-coupon inflation swaps (with maturities greater than 12 months) and invests collateral in short- and intermediate- term municipal bonds.  So the muni bond portion of the portfolio will be federal income tax free, while any net gains from the inflation protection portion will qualify as long-term capital gains.

bulletSchwab US TIPS ETF (SCHP).  E/R: 0.07%.  This ETF tracks the Barclay's US Government Inflation-Linked Index.  For more information on ETFs, see here.

bulletVanguard Inflation Protected Securities Fund Admiral Shares (VAIPX).  E/R: 0.10%.  This fund invests in TIPS.

bulletPIMCO 15+ Year U.S. TIPS Index Fund (LTPZ).  E/R: 0.20%.  This ETF tracks the Merrill Lynch 15+ Year US Inflation-Linked Treasury Index of long-term TIPS.  The longer duration should amplify the diversification benefit of this fund (i.e., it should decrease correlation with other asset classes).  For more information on ETFs, see here.
 
bulletDFA Inflation-Protected Securities Portfolio (DIPSX).  E/R: 0.12%.  This fund buys TIPS with maturities of five to twenty years.  Because of the "buy and hold" nature of DFA fund investors, we expect that this fund will be very capital-gains tax efficient.

bulletDFA LTIP Portfolio (DRXIX).  E/R: 0.15%.  This fund buys TIPS with greater than 20 year maturities.  The longer duration should amplify the diversification benefit of this fund (i.e., it should decrease correlation with other asset classes).

bulletFidelity Spartan Inflation-Protected Bond Index Fund Fidelity Advantage Class (FSIYX).  E/R: 0.10%.  Minimum initial investment = $100,000.  This fund tracks the Barclays U.S. Treasury Inflation-Protected Securities (TIPS) Index.

bulletSPDR Barclays TIPS ETF (IPE).  E/R: 0.1845%.  This ETF tracks the Barclay's US Government Inflation-Linked Index.   As an ETF, this fund is expected to be more (capital gains) tax-efficient than the non-ETFs listed here.  However, this asset class isn't expected to generate very high capital gains distributions in the first place.  For more information on ETFs, see here.

bulletiShares Barclays US TIPS Fund (TIP).  E/R: 0.20%.  This ETF tracks the Barclays US Treasury Inflation Bond Index.   As an ETF, this fund is expected to be more (capital gains) tax-efficient than the non-ETFs listed here.  However, this asset class isn't expected to generate very high capital gains distributions in the first place.  For more information on ETFs, see here.

bulletPIMCO Broad U.S. TIPS Index Fund (TIPZ).  E/R: 0.20%.  This ETF tracks the Merrill Lynch US Inflation-Linked Treasury Index.  For more information on ETFs, see here.
 
bulletPIMCO 1-5 Year U.S. TIPS Index Fund (STPZ).  E/R: 0.20%.  This ETF tracks the Merrill Lynch 1-5 Year US Inflation-Linked Treasury Index of short-term TIPS.  For more information on ETFs, see here.
 
bulletFidelity Spartan Inflation-Protected Bond Index Fund Investor Class (FSIQX).  E/R: 0.20%.  Minimum initial investment = $10,000.  This fund tracks the Barclays U.S. Treasury Inflation-Protected Securities (TIPS) Index.

bulletVanguard Inflation Protected Securities Fund (VIPSX).  E/R: 0.20%.  This fund invests in TIPS.

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This web page contains the current opinions of Eric E. Haas at the time it is written and such opinions are subject to change without notice.  This web page is intended to serve two purposes:

bulletTo educate the public; and
bulletTo provide disclosure of Mr. Haas' opinions to prospective clients.  We believe that prospective clients are well-served by being made aware of what they are buying and what they are buying is advice that is based on these opinions.

We believe the information provided here to be useful and accurate at the time it is written.  Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. 

No investor should invest solely on the basis of information listed here.  Before investing, it is important to consult each prospective investment's prospectus and consider both its risk/return characteristics and its effect on your overall portfolio.

This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice.  Where specific advice is necessary or appropriate, Altruist recommends consultation with a qualified tax adviser, CPA, financial planner, or investment adviser.  If you would like to discuss the rationale or support for any particular idea expressed on this web page, feel free to contact us.

 

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