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Monday, May 24, 2010

TIPS vs GNMA Performance with 2.2% Inflation Rate

TIPS vs GNMA Performance update with 2.2% CPI-U Inflation Rate.  Both securities are backed by the U.S. government.

Bob Brinker continues to recommend Vanguard's GNMA Fund, VFIIX, on his radio show. Over the course of last year, I sold out of my "explore portfolio" position in Vanguard's GNMA fund and replaced it with individual TIPS.  A good, recommended alternative is Vanguard's TIPS fund, VIPSX.
Vanguard Comparison Table
Vanguard Fund (5/24/10)
Total Bond Index
Prime Money Market Fund
Inflation Protected Security Fund (TIPS)
Total Stock Market Index Fund (for comparison)
Last Week's CPI Press Release says Year-over-year CPI rose at a 2.2% rate.
On a seasonally adjusted basis, the Consumer Price Index for All  Urban Consumers (CPI-U) declined 0.1 percent in April, the U.S.  Bureau of Labor Statistics reported today. Over the last 12 months, the index increased 2.2 percent before seasonal adjustment.
  • My 5-yr TIPS with a 1.25% base rate will earn 3.35% at this rate of inflation.
  • My 20-yr TIPS with a 1.375% base rate will earn 3.575% at this rate of inflation

In the Retairement Advisor newsletter, we recommended the TIPS fund from Vanguard, VIPSX, over TIPS for all of 2009 and so far this year.
2009 Total Return
VFIIX = 6.9%
VBMFX = 5.9%
VMMXX = 0.53%
VIPSX =  10.8%
VTSMX = 28.7%
  • GNMA:  Government National Mortgage Association (”Ginnie Mae”) securities. 
  • TIPS:  Treasury Inflation Protected Securities 
More Information:
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Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 159% (a double plus another 59%!!) vs. the S&P500 UP a tiny 8.6% vs. NASDAQ UP a tiny 3.5% (All through 12/31/09
In 2009, "Kirk's Newsletter Explore Portfolio" gained 33.5% vs. the DJIA up 18.8%

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