Suitable Substitute for TIPS in a Variable Portfolio?

[cnh]

I'm looking at VP options for a 401k, where running a PP is infeasible due to the investment vehicles available, and I'd welcome some input.

In a separate thread with topic name "Is the Permanent Portfolio The Gold Medal Winner For Investing?" somebody suggested the "Yale Portfolio" (aka Swenson Portfolio) as a "bronze medal" contender.  Swenson suggests an individual can implement it as follows:
U.S stock, 30%; non-U.S. developed stock, 15%; non-U.S. emerging stock, 5%; real estate, 20%; intermediate treasuries, 15%; and TIPS, 15%.  Low-cost index funds preferred for all.  Admittedly, it's stock-heavy compared to the PP, but if one wanted to implement it as a VP, what would be a better substitute for the TIPS: more intermediate treasuries or a conservative corporate bond fund?  TIPS are not available in the 401k, there's no brokerage window, and there are no gold or commodities options.

Any thoughts?

[number5858]

What about implementing PP as a whole across all your accounts where 401K is only a portion? You might be able to do something like have the stock portion and cash portion in 401K and keep the LTT/Gold portion in IRA or other brokerage account so that you get an acceptable PP as a whole even if you can't have a proper PP just in 401K?

[cnh]

I am considering integrating the 401k and implementing PP across accounts, but because I'm actively contributing to the 401K now (while other accounts are relatively static) this would require frequent rebalancing in other accounts.  Not sure I want to do that.

[rocketdog]

What about implementing PP as a whole across all your accounts where 401K is only a portion? You might be able to do something like have the stock portion and cash portion in 401K and keep the LTT/Gold portion in IRA or other brokerage account so that you get an acceptable PP as a whole even if you can't have a proper PP just in 401K?

I thought about that approach myself, but then nixed it due to the rebalancing problems.  This is especially vexing when you and your spouse have 6 different retirement accounts between you where no money can be exchanged between them.  I just decided to do my best within each of the accounts, treating them as individual entities (because that's essentially what they are).  It does lead to owning many more funds than it would otherwise (due to having to replicate holdings in each of the accounts), but it's not so bad when you only rebalance once a year. 

[cnh]

Thanks, rocketdog.  Do you have a view on a reasonable substitute for TIPS...regular intermediate treasures, corporates, or something else?

[MachineGhost]

Any thoughts?

There are other options: http://www.marketwatch.com/story/lazy-p ... 2013-02-27

[rocketdog]

Thanks, rocketdog.  Do you have a view on a reasonable substitute for TIPS...regular intermediate treasures, corporates, or something else?

I don't really think of things as "alternatives" to TIPS.  To me that would be like looking for alternatives to REITs.  I mean, a real estate investment is a real estate investment; there really is no "alternative".  But if you're looking for something that's correlated closely with TIPS, here's a quote from a Vanguard whitepaper called "Investing in Treasury Inflation Protected Securities":

In periods when actual inflation is close to inflation expectations, the total returns of TIPS and conventional Treasuries will be closely correlated.

Otherwise, gold is an even better bet to hedge against inflation (or even just the fear of inflation), which is why it's recommended in the PP.

[rocketdog]

Thanks, rocketdog.  Do you have a view on a reasonable substitute for TIPS...regular intermediate treasures, corporates, or something else?

Here's an old (2009) post on the BH forum about inflation correlated investments:

http://www.bogleheads.org/forum/viewtopic.php?p=404768

Here's a more legible table I created using their data, sorted from least to most correlated:

Asset Class        Ticker      Correlation
Intl Value          VMPXX    0.63
Simulated TIPS      GOLD      0.52
EM                  VFISX    0.28
Mid Cap            PCRIX    0.25
Europe              VISGX    0.13
EAFED              NAESX    0.11
Micro Cap          S-TIPS    0.06
Small Cap          VISVX    0.04
Total Market US    BRSIX    - 
Total Bond          VGSIX    -0.01
LCV                VIMSX    -0.01
REIT                VWNDX        -0.01
SCG                VIVAX    -0.04
Wellesley          VTSMX    -0.06
Wellington          VEIEX    -0.06
LCG                VPACX    -0.06
500 Idx            VIGRX    -0.07
5 Yr T              VFINX    -0.09
Windsor            EAFE/EM      -0.09
ST Trsry            VDMIX    -0.10
Commodities        VTRIX    -0.10
Pacific            VEURX    -0.10
LTGB                VBMFX    -0.12
GOLD                VWELX        -0.16
TBILL              VWINX    -0.21
EAFE85/EM15        VFITX    -0.24
SCV                VUSTX    -0.40

[goodasgold]

Thanks, rocketdog.  Do you have a view on a reasonable substitute for TIPS...regular intermediate treasures, corporates, or something else?

Here's an old (2009) post on the BH forum about inflation correlated investments:

http://www.bogleheads.org/forum/viewtopic.php?p=404768

I tend to look at correlations with a grain of salt. One of the things that struck me while reading the PP book is how correlations change over time, and in a crisis many of them the risk factors tend to merge. So I am generally happy with the standard 4X25 (although a portion of my portfolio is still in the standard "age-in-bonds" Boglehead mode, including nominal and TIPs bond funds.) The big question is: when will rates rise?? If I could just gaze into my crystal ball and come up with a firm date, I would save myself a lot of trouble. But my crystal ball is out for repairs. 

[MachineGhost]

Intl Value          VMPXX    0.63
Simulated TIPS      GOLD      0.52

Ught.  Talk about amateurs running amok.  To paraphrase the evil henchman John Hussman, anything has a high correlation to each other as long as both are trending up in the same direction.  Here is a far better list of what does well under negative real rates:

http://gyroscopicinvesting.com/forum/ht ... 7#msg41097