Simple question right? I am not watching the market everyday trying to time it. I’m an average young professional looking for long term growth. Currently I am investing in my tax deferred 401k at my company, my Roth IRA, Brokerage account, and MMA.
Within these accounts is there a sector which would protect what I currently have for a while? Foreign, Bonds, MMA etc. Saving my money in my MMA is almost a wash with the rate of inflation. I am getting about 4% APY, and inflation seems higher than that. My funds in my IRA, and 401k have gone down about 15-20%. Do I just sit tight and hope for a rebound? or do I move into safer funds for the time being?
August 25th, 2008 at 10:17 am
A lot of people that I know have moved into cash or TIPS. I have an inflation protected fund in my 401k that I’ve taken a position in. Otherwise I’m just looking for good buy opportunities.
August 25th, 2008 at 3:05 pm
Does moving into cash really help you? Are the rates better than inflation?
What are TIPS?
August 25th, 2008 at 3:11 pm
Well think of it this way if you were long SP500 on OCT 09,2007 when SP500 was at 1565 you would have saved your self 17.4% since SP500 closed at 1292 on friday, if you were all cash since OCT. You would also be able to now buy in at a significant discount. By moving to cash i don’t mean holding bags of cash or moving the money to your checking account. By cash I mean bying a CD.
Treasury Inflation-Protected Securities (TIPS)
Treasury Inflation-Protected Securities, or TIPS, provide protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When a TIPS matures, you are paid the adjusted principal or original principal, whichever is greater.
TIPS pay interest twice a year, at a fixed rate. The rate is applied to the adjusted principal; so, like the principal, interest payments rise with inflation and fall with deflation.
You can buy TIPS from us in TreasuryDirect and Legacy Treasury Direct through non-competitive bidding. Starting in January 2007, the 20-year TIPS is no longer sold in Legacy Treasury Direct, but it continues to be available in TreasuryDirect.
August 26th, 2008 at 4:15 pm
Oh nice, I see. Move to cash investments, CD/MMA for the short term while you wait to buy in when the market starts to come around again?