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 Post subject: Online Saving Account vs. Inflation-Protected Mutual Funds
PostPosted: Wed Mar 06, 2013 12:32 am 

Joined: Thu Sep 20, 2012 12:17 pm
Posts: 3
Hello all,

I've been looking at my ING and Ally online saving account and the interest rate is very low. On the other hand, I see the price of pretty much everything going up: from a bag of M&Ms at the grocery store to houses. I’ve been looking at other investments that could yield a bit more than a simple saving account and protect me against the inflation.

- VIPSX - Vanguard Inflation-Protected Securities Fund Investor Shares
- PRTNX - PIMCO Real Return Fund A

Looking at the historical data, they seem pretty safe investments. I was wondering if people on this forum think about such investments. Have you consider them instead of an online saving account?

Thanks!


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 Post subject: Re: Online Saving Account vs. Inflation-Protected Mutual Fun
PostPosted: Wed Mar 06, 2013 8:17 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
I think you would be smart to study ALL the risks of owning bonds. Especially any risk you would be taking on as it relates to a change in interest rates. Then I'd look at what a Bond fund's avg eff duration is and what it means. Not to mention, the PIMCO fund has a 129% turnover, so you'd get beat up with taxes.

Personally, I use CD's (mine are ~2.5%, obviously that deal isn't currently on the table) and I-bonds for money I need to be "safe." I bonds have some liquidity issues in the 1 st year, but after that it doesn't open the door to a lot of the risks other bonds do. If you're serious about buying I-bonds, I would wait for another month. at that time I will be able to tell you what the inflation component will be doing (and most likely what the overall rate will be for April-October). Currently, I-bonds are paying 1.76%.

Perhaps some exploration around if you can take other risks with all or a portion of the money. If so, now may be the time to study practices of tax efficient investing and the birth of taxable accounts if you haven't already done so.

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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