WKFord

An ETF Portfolio For Your IRA

I must be the only one not to get the TIP strategy. As I see it, TIP provides a lower yield in return for a yield adjustment based on the prevailing inflation rate. But every diversified portfolio includes a stock component that also serves as an inflation hedge. Further, most people have a small (25% ?) target allocation for bonds such as TIP's. So, the explicit inflation hedge of the TIP doesn't hedge very much (when compared to an equity which typically has the pricing power to adjust for inflation).

So I would never recommend holding a TIP as an inflation hedge or as a fixed income security. Can someone explain the error I'm making?