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Old Mar 22nd, 2012, 02:34 PM   #1
newguy05
 
 
Join Date: Oct 2007
Posts: 1,913
Like to get some feedback about long term investment in an inflation indexed bonds etf.

I have build up a decent amount in my company 401k, but it has very limited investment options - just a few etf index funds. One of them invests in inflation indexed bonds. With the assumption that inflation / interest rate will start to kick in within 5 years, is it a good idea to invest in this?

If the assumption is interest will go up, then one should not investment in us treasuries but on the flip side that also means inflation will be going up. So looking for some opinions on putting my money in this etf right now, looking to do about 20% allocation.
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Old Mar 22nd, 2012, 02:44 PM   #2
nazzdack
 
 
Join Date: Jul 2004
Posts: 8,947
Quote:
Quote from newguy05:
----inflation indexed bonds etf.
----With the assumption....
----If the assumption....
----but on the flip side....
----that also means....
1) Do you fully understand what can happen to that ETF during a deflationary spiral?
2) In order for "inflation" to occur, interest rates will probably have to rise a lot. Would you feel good to lose 25% or more of your money while others around you lose 30% or more of their money?
3) This is another example of a product that was created AFTER the "need" for it had passed.
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Old Mar 22nd, 2012, 02:58 PM   #3
Martinghoul
 
 
Join Date: Jan 2009
Location: London
Posts: 6,499
Inflation-linked bonds are still bonds, so if interest rates rise, they will underperform. You need to be aware of this.
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Old Mar 22nd, 2012, 03:05 PM   #4
Bob111
 
 
Join Date: May 2002
Posts: 7,414
Quote:
Quote from nazzdack:

1) Do you fully understand what can happen to that ETF during a deflationary spiral?
2) In order for "inflation" to occur, interest rates will probably have to rise a lot. Would you feel good to lose 25% or more of your money while others around you lose 30% or more of their money?
3) This is another example of a product that was created AFTER the "need" for it had passed.
i see no single sign of any deflation any time soon. with benny and barry in charge all i see is more printing,more debt,lower dollar and everything that comes with it. and similar ending ala greece or iceland
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Old Mar 22nd, 2012, 03:49 PM   #5
oldtime
 
 
Join Date: Jun 2011
Posts: 7,479
I would not buy them in a ETF. There isn't that much money in them even if everything goes well. And then when you have to give up the little you make in management and expense fees, it isn't worth it.

The beauty of 401k and IRA's is you are protected from cap gains tax. So it makes more sense to invest more aggresively (high turnover) in tax sheltered accounts.

If I Bonds fit into your retirement plan, you would be better off just buying them outright with your personal money and holding them to maturity.
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Old Mar 22nd, 2012, 04:12 PM   #6
nazzdack
 
 
Join Date: Jul 2004
Posts: 8,947
Quote:
Quote from Bob111:
----i see....
----benny and barry....
----greece or iceland
1) You appear to be answering a question that you wish I would have asked.
2) Bob, do you fuly understand what can happen to that ETF during a deflationary spiral?
3) Did you compose your other response on a smartphone?
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