Very true, and I won't be able to do much with TIPS in this historical analysis.This nice analysis seems consistent with David Swensen’s recommendation to generally use Treasuries rather than corporate or mortgage backed bonds as a fundamental building block in a portfolio. Swensen emphasizes that — during “bad times” — non-callable, full faith and credit Treasuries perform better than mortgage backed securities and corporate bonds, which have prepayment and equity-type risks that Treasuries do not. (Those risks of mortgage backed and corporate bonds tend to materialize precisely during “bad times” for the rest of the portfolio, when you especially want your bonds to be doing well.)
Swensen also recommends using TIPS as a separate asset class alongside nominal Treasuries, because the performance of the two types of securities is driven by some fundamentally different factors (unexpected inflation vs. unexpected disinflation or deflation). Unfortunately, the TIPS performance data only go back to the late 1990s, so it’s hard to do the full analysis using historical data!
Statistics: Posted by McQ — Tue Mar 26, 2024 10:06 pm — Replies 8 — Views 1201