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iShares TIPS Bond Message Board

  • tuatha6 tuatha6 Jan 23, 2011 8:47 AM Flag

    tips or wips?

    sounds like kind of an s&m question, but seriously how is the board divided between the two? I own tips but am considering getting back into wips (and that board is definitely snoozing).

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    • You buy your stuff in dollars, right? So TIP will protect you against inflation in USD. WIP will protect you against inflation in a basket of foreign currencies. But unless you buy your stuff in a basket of foreign currencies, what is the point of owning WIP? WIP seems more like a bet on the strength of the dollar (if the dollar goes up, foreign inflation will also go up) than a real domestic inflation hedge.

    • In general, I'd prefer tips over whips. ;)

      But seriously, I do.

      Here's something to think about over the long-term.

      According to Yahooo:

      TIP charges 0.2% per year.
      WIP charges 0.5% per year.

      Over 30 years the differences do add up.

      TIP: (1 - 0.002)^30 = 0.94

      Over 30 years, you'll lose 6% of your money to fund expenses.

      WIP: (1 - 0.005)^30 = 0.86

      Over 30 years, you'll lose 14% of your money to fund expenses.

      I have the bulk of my nest egg sitting in TIPS bought directly from the government. I don't actually have any ongoing fees to do that. Call me a cheapskate.

      Here's something to think about over the short-term.

      Although WIP is technically more diversified than TIP, TIP is a lot less volatile (since there is no exchange rate risk).

      If you were pretty sure that the dollar would decline relative to the currencies of UK, France, and Japan (WIP's top holdings) then WIP could be a good way to play it.

      On the other hand, if you think the UK, France, and Japan are as messed up as we are then maybe TIP isn't so bad.

      Just opinions.

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