The One Number That Explains Why Your TIPS Fund Lost to Inflation

Why isn't my TIPS fund keeping up with inflation? A viewer named Paul put part of his fixed income into VTIP, Vanguard's short-term TIPS ETF, and watched it return about 1.7% this year while inflation ran 3.7%. In this video I explain why that happens, and I show you two TIPS funds that did keep up.

I don't own any of the funds discussed in this video.

Resources mentioned in the video:

U.S. inflation rate (Trading Economics): https://tradingeconomics.com/united-states/inflation-cpi Vanguard Short-Term Inflation-Protected Securities ETF (VTIP): https://investor.vanguard.com/investment-products/etfs/profile/vtip VTIP on Morningstar: https://www.morningstar.com/etfs/xnas/vtip/quote iShares 0-1 Year TIPS Bond ETF (ICPI): https://www.ishares.com/us/products/347171/ishares-0-1-year-tips-bond-etf ICPI on Morningstar: https://www.morningstar.com/etfs/arcx/icpi/performance F/m Ultrashort Treasury Inflation-Protected Security ETF (RBIL): https://www.fminvest.com/etfs/rbil-fm-ultrashort-treasury-inflation-protected-security-tips-etf RBIL on Morningstar: https://www.morningstar.com/etfs/xnas/rbil/performance

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0:00 Why a TIPS fund can lag inflation
0:29 Paul's question: VTIP vs. inflation
1:08 Inflation right now: 3.7%
1:43 VTIP's return this year
2:31 So what's going on?
2:52 Two numbers: average maturity and duration
3:14 What maturity means
4:11 What duration means
5:16 Yields up, bond prices down
6:04 What happened to VTIP this year
6:33 Is there a shorter-duration TIPS fund?
7:28 Fund 1: iShares 0-1 Year TIPS (ICPI)
9:05 Fund 2: F/m Ultrashort TIPS (RBIL)
9:47 The trade-off
10:14 Why not buy individual TIPS?
11:05 My take

ABOUT ME

While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. I've since sold my websites, bought them back, and started a new website and this YouTube channel.

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