Get new articles by email:

Oblivious Investor offers a free newsletter providing tips on low-maintenance investing, tax planning, and retirement planning.

Join over 20,000 email subscribers:

Articles are published every Monday. You can unsubscribe at any time.

Investing Blog Roundup: iShares Defined-Maturity TIPS ETFs

If you want to know, in advance, that you’ll have a specific amount of purchasing power available on a specific date in the future, Treasury Inflation-Protected Securities (TIPS) are the tool for the job.

And if you want to know, in advance, that you’ll have a specific amount of purchasing power available each year for many years, a ladder of TIPS is the right tool for the job.

TIPS mutual funds, while they can be a useful tool, generally can’t do either of those jobs. That’s because TIPS mutual funds keep buying new bonds. So if you were to plan to sell your shares of the TIPS mutual fund at any specific date in the future, there’s no way to know what price you’ll get (because you’re essentially selling bonds prior to maturity).

Earlier this year, Allan Roth challenged the fund industry to implement a fund that could be used as a TIPS ladder. John Rekenthaler of Morningstar argued in favor of the idea as well.

And last month, BlackRock released a lineup of TIPS ETFs that can be used in such a way. They’re called iShares iBonds ETFs. (I hate the name due to the obvious potential for confusion with Treasury I Bonds. But BlackRock didn’t ask me, and the name is of course not the most important point here.)

The idea is that each ETF basically just buys bonds that mature in a specific year — and only that year — and then holds those bonds to maturity. And that’s it. So each ETF can essentially act as a stand-in for one rung of a bond ladder.

It’s a neat idea. I’m happy that they exist. I’d love to see BlackRock extend the lineup out beyond the current 10-year limit. And I’d really be interested to see a fund that actually implements a whole ladder for you.

Other Recommended Reading

Thanks for reading!

New to Investing? See My Related Book:


Investing Made Simple: Investing in Index Funds Explained in 100 Pages or Less

Topics Covered in the Book:
  • Asset Allocation: Why it's so important, and how to determine your own,
  • How to to pick winning mutual funds,
  • Roth IRA vs. traditional IRA vs. 401(k),
  • Click here to see the full list.

A Testimonial:

"A wonderful book that tells its readers, with simple logical explanations, our Boglehead Philosophy for successful investing." - Taylor Larimore, author of The Bogleheads' Guide to Investing
Disclaimer: By using this site, you explicitly agree to its Terms of Use and agree not to hold Simple Subjects, LLC or any of its members liable in any way for damages arising from decisions you make based on the information made available on this site. The information on this site is for informational and entertainment purposes only and does not constitute financial advice.

Copyright 2024 Simple Subjects, LLC - All rights reserved. To be clear: This means that, aside from small quotations, the material on this site may not be republished elsewhere without my express permission. Terms of Use and Privacy Policy

My Social Security calculator: Open Social Security