Comments on: Couch Potato Portfolio Built with ETFs http://www.thesunsfinancialdiary.com/investing/model-portfolios-built-with-etfs-i-couch-potato-portfolio/ Fri, 03 Feb 2012 17:42:24 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: MossySFhttp://www.thesunsfinancialdiary.com/investing/model-portfolios-built-with-etfs-i-couch-potato-portfolio/#comment-2714 MossySF Sat, 17 Feb 2007 17:27:07 +0000 http://www.thesunsfinancialdiary.com/2007/02/16/model-portfolios-built-with-etfs-i-couch-potato-portfolio/#comment-2714 We are currently at a point of inverse yield curves where online savings accounts/CDs return higher interest than bonds. This is an anomaly. Here are the numbers for the past 6 years using Vanguard's Prime Money Market versus Vangard's TIPS fund as proxies for average yields.YEAR CDs TIPS ---- ----- ----- 2006 4.88% 3.55% 2005 3.01% 5.44% 2004 1.11% 4.79% 2003 0.90% 3.86% 2002 1.65% 4.55% 2001 4.17% 4.32%In addition, TIPs can have capital gains/losses due to interest rate changes. Factor that in and you have:YEAR CDs TIPS ---- ----- ----- 2006 4.88% 0.43% 2005 3.01% 2.59% 2004 1.11% 8.27% 2003 0.90% 8.00% 2002 1.65% 16.61% 2001 4.17% 7.61%So the two extra benefits of TIPS is interest that increases with inflation and capital appreciation during deflation (federal reserve decreases interest rates to spur growth). We are currently at a point of inverse yield curves where online savings accounts/CDs return higher interest than bonds. This is an anomaly. Here are the numbers for the past 6 years using Vanguard’s Prime Money Market versus Vangard’s TIPS fund as proxies for average yields.

YEAR CDs TIPS
—- —– —–
2006 4.88% 3.55%
2005 3.01% 5.44%
2004 1.11% 4.79%
2003 0.90% 3.86%
2002 1.65% 4.55%
2001 4.17% 4.32%

In addition, TIPs can have capital gains/losses due to interest rate changes. Factor that in and you have:

YEAR CDs TIPS
—- —– —–
2006 4.88% 0.43%
2005 3.01% 2.59%
2004 1.11% 8.27%
2003 0.90% 8.00%
2002 1.65% 16.61%
2001 4.17% 7.61%

So the two extra benefits of TIPS is interest that increases with inflation and capital appreciation during deflation (federal reserve decreases interest rates to spur growth).

]]> By: Tabhttp://www.thesunsfinancialdiary.com/investing/model-portfolios-built-with-etfs-i-couch-potato-portfolio/#comment-2645 Tab Sat, 17 Feb 2007 01:39:16 +0000 http://www.thesunsfinancialdiary.com/2007/02/16/model-portfolios-built-with-etfs-i-couch-potato-portfolio/#comment-2645 Opps, sorry Sun, hit the wrong key when spelling your name and didn't spell check. Opps, sorry Sun, hit the wrong key when spelling your name and didn’t spell check.

]]> By: Tabhttp://www.thesunsfinancialdiary.com/investing/model-portfolios-built-with-etfs-i-couch-potato-portfolio/#comment-2637 Tab Sat, 17 Feb 2007 00:03:33 +0000 http://www.thesunsfinancialdiary.com/2007/02/16/model-portfolios-built-with-etfs-i-couch-potato-portfolio/#comment-2637 Sub, I am not even close to being very knowledgeable about investing although I have about 14 different funds, but I have always wondered why anyone would put a low earning fund into their portfolio like 'TIP' above when you can earn a consistent 5+% in a CD that is safe and insured. What gives with that? I am sure I am missing something but can't figure what it would be. Sub, I am not even close to being very knowledgeable about investing although I have about 14 different funds, but I have always wondered why anyone would put a low earning fund into their portfolio like ‘TIP’ above when you can earn a consistent 5+% in a CD that is safe and insured. What gives with that? I am sure I am missing something but can’t figure what it would be.

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