{"id":58,"date":"2008-09-26T21:28:54","date_gmt":"2008-09-26T21:28:54","guid":{"rendered":"http:\/\/consumermaven.wordpress.com\/?p=91"},"modified":"2020-01-04T19:02:04","modified_gmt":"2020-01-05T00:02:04","slug":"tax-exempt-investments-the-best-opportunity-now","status":"publish","type":"post","link":"https:\/\/david.bookstaber.com\/Interests\/2008\/09\/tax-exempt-investments-the-best-opportunity-now\/","title":{"rendered":"Tax-Exempt Investments: The Best Opportunity Now"},"content":{"rendered":"<p>Treasury Inflation Protected Securities (TIPS) are a unique asset class ideally suited to investment in tax-exempt accounts (e.g., retirement accounts like IRAs and 401ks).\u00a0 TIPS pay interest like regular treasury bonds, but they also appreciate in line with inflation.\u00a0 The mechanisms by which they pay out are somewhat convoluted and undesirable from a tax perspective, which may contribute to the discount they currently carry in the market.\u00a0 If you can buy TIPS in a tax-exempt account you don&#8217;t have to worry about these nuances.<\/p>\n<p>The clearest way of valuing TIPS is in terms of the &#8220;break-even rate of inflation,&#8221; which is the inflation rate at which an investor would earn the same from TIPS as from regular treasury bonds of the same maturity.\u00a0 If realized inflation exceeds the break-even rate then investors in TIPS earn more.\u00a0 If inflation is lower than the break-even rate then investors in regular treasuries earn more.<\/p>\n<p>Considering the break-even rate, TIPS are extremely cheap.\u00a0 For example, the break-even rate on 5-year TIPS is 1.12% &#8212; well below current inflation, historical inflation, and even the Fed&#8217;s target inflation rate.\u00a0 The dollar faces a number of <a title=\"Brace for Dollar Inflation\" href=\"http:\/\/federalist.wordpress.com\/2008\/08\/25\/brace-for-dollar-inflation\/\">inflation risk factors<\/a>, and the current market bailout by the U.S. Treasury only adds to these risks.<\/p>\n<p>Since TIPS are an undervalued, tax-inefficient asset that offer inflation protection they make an ideal investment for tax-exempt retirement portfolios.\u00a0 Investors who want heightened exposure to these characteristics can buy leveraged CEFs that invest in TIPS: E.g., WIW and WIA.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Treasury Inflation Protected Securities (TIPS) are a unique asset class ideally suited to investment in tax-exempt accounts (e.g., retirement accounts like IRAs and 401ks).\u00a0 TIPS pay interest like regular treasury bonds, but they also appreciate in line with inflation.\u00a0 The mechanisms by which they pay out are somewhat convoluted and undesirable from a tax perspective, [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[49],"tags":[9,13,15,24,44],"class_list":["post-58","post","type-post","status-publish","format-standard","hentry","category-finance","tag-best-investments","tag-cefs","tag-closed-end-funds","tag-inflation-protected-funds","tag-tips"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/po3d1-W","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/posts\/58","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/comments?post=58"}],"version-history":[{"count":1,"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/posts\/58\/revisions"}],"predecessor-version":[{"id":66,"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/posts\/58\/revisions\/66"}],"wp:attachment":[{"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/media?parent=58"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/categories?post=58"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/david.bookstaber.com\/Interests\/wp-json\/wp\/v2\/tags?post=58"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}