Episode 438: Should We Market Time Gold, What About TIPS, And What About The Children?
Risk Parity Radio
Intro
In this chapter, the host welcomes listeners to Risk Parity Radio and dives into addressing listener emails while fostering a sense of community. They also discuss upcoming website changes and encourage feedback from listeners in a lighthearted manner.
In this episode we answer emails from Brian, Gary and Rob. We discuss the foibles of follies of attempting to market-time gold, the fundamental problems of trying to use TIPS as inflation "hedges" in a diversified portfolio and the limited circumstances in which they make sense, introducing children to financial topics, and tax considerations in making portfolio transitions.
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Links:
Father McKenna Center Donation Page: Donate - Father McKenna Center
Bill Bernstein TIPS Ladder Article ("A bond fund manager recently related to me his difficulty in figuring out the role of TIPS in his portfolios. After fumbling for a reply, I realized that he was right: like Social Security, they don’t occupy a formal slot in most folks’ asset allocation."): Riskless at Age 104 - Articles - Advisor Perspectives
Once Upon A FI Book: Once Upon a FI by Paul Mollenkopf | Discover Financial Wisdom Today
Analysis of LTPZ (-31.68% in 2022 -- "that's not an improvement!"): LTPZ – PIMCO 15+ Year US TIPS ETF – ETF Stock Quote | Morningstar
Breathless AI-Bot Summary:
Ever found yourself frozen by investment indecision? In this illuminating mailbag episode, we tackle three pressing questions from listeners who've generously supported the Father McKenna Center.
First, we address the common dilemma of gold market timing. When prices seem high, should you wait for a pullback or stick to your long-term plan? The answer lies not in crystal ball predictions but in understanding the purpose gold serves in your portfolio across decades, not months. Rather than trying to outsmart the market, consider transitioning gradually into your desired allocation—whether that means buying now or implementing a systematic approach over time.
The conversation then pivots to one of investing's most misunderstood instruments: Treasury Inflation-Protected Securities (TIPS). Despite their reputation as inflation hedges, the data tells a different story. We examine why TIPS have consistently disappointed during both inflationary and deflationary environments, dragging portfolios down precisely when protection was most needed. For investors seeking genuine inflation buffers, we explore alternatives that have historically outperformed during inflationary periods, including managed futures, commodities, and certain equity sectors.
Perhaps most valuable is our discussion about raising financially literate children. Rather than forcing concepts on uninterested young minds (a strategy that often backfires), we suggest meeting children where they are developmentally. From opening teen brokerage accounts to creating opportunities for learning about buyer's remorse with small amounts of money, these practical approaches help children develop healthy relationships with finances without overwhelming them.
We conclude with tax-efficient portfolio rebalancing strategies, demonstrating how to reduce overconcentrated positions without triggering massive tax bills. By identifying specific tax lots, directing new investments strategically, and managing dividend reinvestments, investors can gradually transform their allocations while minimizing the tax impact.
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