This is some good information. Thanks. Seems like SCHP would be best for untaxed retirement accounts because it will need to be traded into and out of when inflation rates decrease. For instance, if I sell BRK.b stock in a taxable account I'd be hit with the cap gains tax and wipe out any potential gain from the TIPS returns for at least two years because of the taxes on the BRK sale. Then when inflation subsides I'd have to sell again and reinvest into equities because TIPS would pay very little.
My understanding is that inflation is best offset by: 1) TIPS 2) Real Estate by a .7 ratio (house keeps up with inflation by 70% - or 30% loss inflation adjusted, 3) Stocks; in that order per history.
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Originally Posted by hdanielblank
Funny, I used to work for Value Line and love the fact that they supply safety ranks. That said, individual stocks in a quantity less than 30 are simply to risky in price volatility and credit risk for you to put too much of your nest egg in. Please do not do that.
The answer to this dilemma may lie in Exchange Traded Funds (ETFs), mutual funds that trade like stocks but cheaper and more efficient. They hold a collection of securities that together will deliver much more safety through diversity. The no-brainer ETF to me right now is SCHP, it holds US Treasury Inflation-Protected Securities with a yield guaranteed to rise with inflation. Most brokers will try to talk you into something managed to hedge inflation (more costly and more risky). Don't fall for it. SCHP has a near-zero expense ratio and can be bought for zero through Schwab or Fidelity discount brokerages. Current yield on SCHP is 3.5%. If you are willing to take a bit more risk but far less than holding a single,high-yield utility or energy or transportation, stock, I have a few suggestions for you to check out on your discount brokerage platform. The best for you may be PCEF, an INVESCO ETF that holds 100 income-oriented closed-end funds (also funds that trade like stocks with technical differences). The internal expense ratio of this fund of funds and its market risk are considerably higher than SCHD. However, the bankruptcy risk is zero unlike that of individual stocks. PCEF has been around more than a decade. It pays MONTHLY, not quarterly dividends and it's current annual yield is more than 7.3%. PCEF has no equity market risk other than the price of the stock itself. which will go up or down relative to interest rates but will increase over time so don't sell it, just enjoy the yield. .Another more conventional ETF to buy and hold is SCHD which holds the highest dividend stocks in the S&P 500 and charges a neat-zero expense ration. Its current yield is 2% which is about 50% higher than the S&P 500. I hope this helps.
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