This eighth and final part wraps up my thoughts on the role of TIPS in a Risk Parity portfolio. What did I learn about the asset class? A lot, and here are eight summary observations. Next question: Will I be changing my investing strategy in response? Hmmm…
After checking out TIPS in ETF form (to mixed results), I now turn to how they work if you want to buy and hold them directly. I consider them a type of “solid” cash, and compare them here to T-Bills and I Bonds. But, selecting the best of these really depends on the situation.
In the last post, I took the widest view of TIPS performance I could. This time, I assume I possess perfect timing to look at how TIPS fared during four stretches of high inflation over the past two decades. When its number is called, does this inflation-protection device actually protect?
Stage setting done, so now onto the testing. How would a portfolio with TIPS have done compared to other allocations? Two backtests here that go back as far as I can in the new ETF-based investing era: one back to 2001, and another back to late 2009.
Cobbled together some different sources on TIPS for readers who want to follow up: a comprehensive website, a helpful YouTube channel, and then excerpts from Risk Parity classics by Shahidi, Qian, and Dalio. May follow up with some academic articles, if I can find some good ones!