Gyroscopic Investing

I saw this on Bogleheads.
https://personal.vanguard.com/us/insigh ... t-07242012

Vanguard wrote:The fund will seek to track the performance of Barclays U.S. Treasury Inflation-Protected Securities 0–5 Year Index, a market-weighted index that measures the performance of TIPS with a remaining maturity of less than five years. The U.S. Securities and Exchange Commission is currently reviewing the registration statement filed for the fund on July 24.

I didn't put this in the cash section of the forum because I know how Mssrs Browne, Rowland & "Tex",et al feel about TIPS. However, until I unlock my old Treasury Direct account (locked by failed password attempts), I was considering this as a substitute for I-Bonds for so-called deep cash.

Bad idea? Any thoughts?

By the way, here's the main Boglehead thread on it:
http://www.bogleheads.org/forum/viewtop ... &p=1448149

I would have a lot less of a problem using this for Cash than I would for replacing nominal bonds or gold in the portfolio.

The main concern I have about TIPS is that they have behaved in unexpected ways in the not to distant past. 2008's liquidity issue is just one example. They are not as well proven as t-bills in terms of performing the role of cash in the portfolio. Caveat emptor. I'll stick with T-bills simply because under high inflation the market adjusts the rate so quickly they will match inflation anyway without having to rely on inflation adjustments from the good folks at at the Bureau of Labor and Statistics.

dualstow wrote:
Bad idea? Any thoughts?

It will probably engage in Vanguard's usual 80%/20% monkey business.

craigr wrote:
The main concern I have about TIPS is that they have behaved in unexpected ways in the not to distant past. 2008's liquidity issue is just one example.

What unexpected happened with TIPS in 2008?

I've been thinking of a 50/50 split for nominal and inflation protected STT's for some time.  I think short term tips will hold in fairly well during deflation and there is enough inflation normally that they will probably out-perform SHY alone, IMO.