Personal Finance and Investing

Whether the price of a TIPS on the secondary market looks "good" has to mean that you disagree with the rate of inflation which the consensus is imputing to it.

It's your opinion versus the opinion of everybody else who makes up the TIPS-investing public.

You'd be using your same sense of future inflation to decide whether to sell a TIPS prior to maturity in order to harvest an inefficiency which you believe has arisen in your favor while you were holding the bond.

Since I am bad at guessing and impatient about maturity dates, I have been sticking to zero coupon bills which right now are yielding upwards of 4.5% at the nine-month mark.

As they mature, I roll the proceeds into the same again, always gaining the benefit of the latest rates in a rising-rates environment. I make the general assumption that current rates will reflect the inflationary pressures being combated in real time by the Federal Reserve.

Since these are zero coupon instruments, I don't need to pay any specific earned interest to the last guy who owned them. The market price I pay is an expression of yield-to-maturity at face value. Period.

Save your guessing for when you think interest rates will cease being raised. That's when you should start rolling over your zero coupons as they mature into a long-term treasury bond ETF like TLT. That way, you'll hopefully lock in somewhere near the highest rate in the cycle, and participate in price appreciation if interest rates are actually brought lower from there.