Too late to invest in TIPS?

Question

I believe inflation in the United States will continue to rise for years to come, because rising fuel prices cause the prices of everything else to rise. I have been considering investing in Treasury Inflation Protected Securities (TIPS) as a safe haven for a chunk of money. But now I read that Morningstar has said that the yields on TIPS have gotten so low, that even the fact they're inflation protected makes them a poor investment at this time. In essence, it's too late to buy them. I'm not sure I agree, given my assumption that inflation is here to stay for a long time. What do you think?

Answer 1

I bought TIPs recently.  I have zero confidence that inflation is contained - the price of food and oil is working its way into every day life.   Everything will go up in price.  Plus the Fed is printing money and Bernanke is using a helicopter to drop wads of cash on Wall Street. And you think 3% inflation is high??

Answer 2

It sort of depends on what YOU want and expect. Morningstar and such are fond of sifting and sorting to make lists. They have the resources to compare a wider spectrum than we mere mortals could on our own.

If you aren't trying to find THE biggest, best, or flashiest, etc. Then TIPS are open, available, and uncommonly easy ways to safely stash some cash for the future: http://www.treasurydirect.gov/indiv/prod...

Answer 3

Morningstar has a valid point.  I think the rate is 1%.  This of course is thanks to the Fed which is more interested in bailing out fools that made bad investments than in protecting the savings of people that didn't.  Typical Washington stupidity, but then if we did not hear Washington and stupidity in the same sentence, it would be an oxymoron.

On the other hand it might very well be 4% 10 year bonds by a wide margin assuming the consumer price index fairly represented inflation which it does not.  The government likes to lie.

If you are willing to take some additional risk, you can get 7% return plus some expected capital appreciation by investing your money in pipeline limitied partnerships.  The dividend is subject to state and local taxes if it is held outside of a Roth IRA.

ETP pays 7.5% and has a 5 year annual return of 32%.  Ten year annual return of 24%

MMP pays 7.3% and has a 5 year annual return of 16.5%

PAA pays 7.3% and has a 5 year annual return of 16.2%

Beats the c**p out of those worthless government bonds.

Answer 4

Real inflation is over 16%.

The mad scientists at the Fed are imposing a stealth tax.

Try reading a chart outside of the government's influence, will ya?