Online Saving Account vs. Inflation-Protected Mutual Funds

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Joined: Thu Sep 20, 2012 12:17 pm

Online Saving Account vs. Inflation-Protected Mutual Funds

Postby trudeo » Wed Mar 06, 2013 12:32 am

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?


Bichon Frise
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Joined: Fri May 04, 2012 2:23 pm

Re: Online Saving Account vs. Inflation-Protected Mutual Fun

Postby Bichon Frise » Wed Mar 06, 2013 8:17 am

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

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