What Are Tips | How To Buy Tips Fidelity & Treasury Direct (Treasury-Inflation Protected Securities)
So what are TIPS? How to buy TIPS (Fidelity & Treasury Direct)? Treasury-inflation protected securities (TIPS) - this video will walk you through:
1:30 Detailed examples of how treasury inflation bonds work
6:00 What happens to treasury inflation protected bonds when there is inflation vs deflation
8:38 The pros & cons of buying TIPS as well as some key differences/ similarities between TIPS vs i-bonds
12:55 How to buy TIPS directly - focusing specifically on how to buy TIPS on Treasury Direct, how to buy TIPS on Fidelity & why/ how to buy TIPS in IRA
27:10 How many TIPS we own in our personal portfolio AND
why we chose to buy TIPS (or not)
👉👉 UPDATE/ CORRECTION 15:55 - 17:20: "YOU NEED TO PLACE YOUR ORDER BETWEEN THE ANNOUNCEMENT DATE & THE DAY BEFORE THE AUCTION DATE."
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#jenniferlammer #bonds #firstgeneration
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• What Are Tips | How To...
Thanks for visiting our personal finance channel! We hope this free content will help fast-track your financial journey! Please note that there are questions/ comments which I will not be able to answer without fully understanding your financial, personal & other circumstances. Everyone's financial journey is different. If you wish to set up a consultation call & discuss whether we can help you on an individual basis, please complete the Work With Us form on our website: www.diamondnestegg.com 👉👉 UPDATE/ CORRECTION 15:55 - 17:20: "YOU NEED TO PLACE YOUR ORDER BETWEEN THE ANNOUNCEMENT DATE & THE DAY BEFORE THE AUCTION DATE" >>>> WATCH NEXT >>>> ⭐ Buy I-Bonds Now Or Wait Until Oct OR Nov: kzhead.info/sun/pcWTebZ-jXOVaKM/bejne.html ⭐ 2022 November I-Bond Rate Prediction: kzhead.info/sun/epxrnJaSi6KaYJs/bejne.html ⭐ How To Buy An I Bond (step-by-step tutorial) via TreasuryDirect: kzhead.info/sun/lMizndOwlpForYU/bejne.html ⭐ How Is I-Bond Interest Formula Calculated & When Does It Show Up In Your Account: kzhead.info/sun/bMyfeNOLoJyAeKM/bejne.html ⭐ I-Bonds 9.62% Confirmed: How Much Could You Earn: kzhead.info/sun/rduHpLqGoV9qg2w/bejne.html ⭐ How To Buy More/ GIft I Bonds (For Spouses & Marred Couples): kzhead.info/sun/lbeoiq6CsKKJdIk/bejne.html ⭐ I-Bond Gifting Tips, Restrictions & Limitations: kzhead.info/sun/Zbl7iLyJjKqAZ4U/bejne.html ⭐ I-Bond Beneficiary vs. Secondary Owner: kzhead.info/sun/aJVpiZR8bJqliac/bejne.html ⭐ How To Buy I-Bonds For Kids (step-by-step tutorial): kzhead.info/sun/jNB-Y7mwppeXm2w/bejne.html ⭐ How To Buy I-Bonds With A Trust (step-by-step tutorial): kzhead.info/sun/arOQl8abmpeqqXA/bejne.html ⭐ How To Create A Revocable Living Trust To Buy More I-Bonds: kzhead.info/sun/nceEerWiq3-rl2g/bejne.html ⭐ How To Buy I-Bonds For Business (step-by-step tutorial): kzhead.info/sun/Z8pmiq2noIF8p2g/bejne.html ⭐ I Bonds vs TIPS: kzhead.info/sun/la2qaLyQpmaMmac/bejne.html 💎 Subscribe to our channel for all things inflation, I-Bonds, TIPS, Treasury Bills & long-term sustainable wealth!!
Even though I already knew enough about TIPS to know they are not for me, I watched the entire video because I like how thoroughly you explain everything. More videos please!
We’re working on it!!!
Your videos are legendary! Thanks so much for the thorough explanation!
It's pretty cool that you purchased tips for the purposes of this video. Great content as always.
You’re the best as always ! Well explained. Thanks a bunch❤️
I have had a hard time understanding TIPS for a while now. I think the lightbulb FINALLY went off in my head. Thank you for taking the time to explain them and how to purchase them.
very clear and detailed explanation, just what I needed, thank you
Thank you for your clear and concise step-by-step primer....
The TIPS purchase examples and pros/cons were very helpful, Jen. Thank you!
Great explanation and must see again and again…..thank you
Thank you for this detailed but easy to understand lesson on investing in TIPS.
It's June 2023, and I just purchased my very first TIPS (5-year) via TD Ameritrade (Roth account), thanks to this video! I apparently viewed this video back when it came out nine months ago, but sadly, I have zero recollection of any of it. Thank you for the tutorial!
Very helpful. Thx.
-just spectacular explanations.
Great video. I learned something new today. And step by step explanation is great!!! 👍
Wow! Every time I think your videos can't get any better, I am proven wrong. Thank you for the great content. I will say that for us, the fact that the new issue TIPS can be purchased in our Fidelity retirement accounts makes this VERY appealing. Something I did not know until you released this video.
Great video thanks for sharing 👍
Great video. So well explained. Thanks for all the detailed information.
Hi Carol. Thanks for the follow-up email! Any updates from TD about Mom's I-Bonds?
I was intrested in purchasing TIPs via my brokerage account. Thanks for a clear and to the point video. Excellent presentation.
Thank you.
didnt know what are TIPS - great info
Thank you for making the video! Super helpful with clear explanations and detailed step by step instructions! More importantly it opened my eyes for a very good alternative to I-Bond, in some sense even a better one. Will definitely buy TIPs in the coming auctions.
Glad you enjoyed the video
Great vid! Please do one on T-notes/bonds vs I bonds. Which typically give better APY? Does neither have compounding interest?
Good Info!!👍
I clicked like before even watching it cuz I know it will be good 👏
😂
Thanks for the very detailed and clear video explanation. Someday consider doing a follow up on how to buy tips from Fidelity on the *secondary* market.
Adding it to the list
How to build a 20 year TIPS ladder from secondary market using fidelity? Time seems to be ripe for locking in duration. Please do a video if possible.
Jennifer, I came to this video from your Bond Masters course. It looks like I somehow skipped or missed this video when it originally came out! 😯 This was a great overview of how the principal and interest work in a TIPS. The "phantom income" literally sounded scary to me because I didn't understand it as well before. Your chart cleared it up. I'm looking forward to watching your video on taxes in the TIPS playlist! 👍
Hi Boris - I'll pass this onto Jennifer! We see that you signed up for Bond Beginners as well. Jennifer is just wrapping up an ENTIRE module on TIPS that we're really excited about. Stay tuned - it should be coming out in the next 2 - 3 weeks. Best - Eva
Welcome back!
Thanks 😊
I bought a $100 tips just to watch it- kind of a 5 year experiment. I had to pay $1.48 for it ?? I put in the order on 10/30 and it was purchased 12/30. It’s very confusing. But I’ll get back to you in 5 or so years to update 😅😅😅. I had a tips etf but all it did was go down!
Does TD Ameritrade sell new issue TIPS? I did not find it, but it might also be because there is no auction scheduled right now. And for the tax complications, it is just one more 1099 INT and one more 1099 OID each year? If so it is not terribly difficult as long as Treasury Direct or the brokerage send over those 1099s and I do not need to calculate the principle adjustment and dividends myself...
Thanks a lot for great video. Is the value of annual inflation rate in Tips same as inflation rate in I-Bond at the same period?
Yes, they are both based on the CPI-U, but TIPS & I-Bonds adjust differently for inflation as explained in the video.
Fantastic video - I've been dreading TIPS for the longest time and I should have really got on board a long time ago. For the last two weeks I've been looping on the complexities of tips - buying at auction is definitely the easiest way. Your video really helped confirm all my ideas - I'm doing iBonds but for my Fixed Asset - I do want to move away from Total Bond Market as it has been a very rough ride - so new money will like go to TIPs. I'll check out your other videos as well.
Nice job on the video. Can you explain the mechanics of pricing in the secondary market for TIPS? e.g. Why do rising interest rates negatively affect TIPS pricing in the secondary market?
That’s a great video idea - we’ll add it to the long list
Good point. No-one talks about it because very few people trade TIPS. They explain only how the bonds accrue principal and interest which are inflation linked. If you are not going to hold TIPS to maturity you are in for a wild ride. The price of TIPS falls with rising interest rates and rises with falling rates-very dramatically especially at the long end. This means there are wonderul opportunities to make(and lose) a lot.
If I buy one10 year tip in the secondary market for $1000 and inflation is -3 every year and the real interest is 2% what will I get at maturity? BTW great video Paul...
Thanks. I think I get how TIPS work, thanks to you. SO if inflation gow up @3% for a couple years, you pay that phantom tax, but if it then goes down 5% one year, your total value will drop. So I'm guessing your OID statement will show a loss of 5% that can be used against other gains? Does that sound correct?
Do you have any videos about your background? Did you work in finance/investment? Curious what your story is.
thanks so much for this great video, as always! I'd like to ask if TIPS is a better option than I-Bonds if I intend to keep my TIPS (eg. 5 year) until its maturity and my outlook is that no deflation will happen in the next 5 years. Many thanks!
November 2023 I-Bond Rate Prediction | Why Buy TIPS Now (Treasury Inflation-Protected Securities) kzhead.info/sun/Zb2QnNmKjp1ngaM/bejne.html
Appreciate your sharing. please add jn your List ** What happens with your IBond when the Inflation rate goes down, govt is working on lowering it.
If inflation goes down, so does the I-Bond rate. We talk about it in our other I-Bond videos if you’re interested.
i love your lipstick! and your tips!
yes i agree, Jennifer is very charming and cute
Hi. I am here from Bond Masters. I intend to start buying TIPs on Fidelity. I noticed in the tutorial for purchasing on Fidelity that the coupon was 0.625% but the expected yield was 0.600%. Can you tell me why there is a difference? Also, the notion of auctions/bidding makes it seem like that there is some unknown element that we are bidding, so what exactly is it? The coupon rate or the price? BTW, thanks for this amazing video.
Thanks a lot for great video. Are you planning to make a video on treasury bills? With raising interest rates, I think its better invest in treasury bills which are of short term, less than six months.
Yes, we're working on it right now.
@@DiamondNestEgg Thanks a lot for helping the community, this is the only channel where I go and see if there are any new videos and read comments to see your replies.
Are the next round of 5-Year TIPS expected to carry the around the 1.65% fixed rate like the last?
Been wondering about TIPS. Thank you. I'll stick with I-Bonds.
Same.
So if you open at tips in Jan 2024 you must include it in your taxes? And how about with T-notes?
Good vid....but what happens to the TIPS real return when food, energy, transportation and housing are pulled out of the CPI? Supercore or Supershaft?
That depends on the real yield you got on your TIPS when you initially purchased them.
Very good education to us! I've learned a lot! questions, the inflation's rate is changed according to the actual rate or it is fixed at 3%? what it is the rate of last month's TIPS if it is changed? Thanks so much!
Glad to hear. The inflation adjustment is actually more complicated than that. I'll probably need to address this in a separate video at some point. In the meantime, if you want more details, check out this TD link: www.treasurydirect.gov/marketable-securities/tips/#id-how-and-when-we-adjust-tips-for-inflation-892229
Jennifer - In looking at the auction schedule, I see that some TIPS auctions show an R for reopening. Does this mean that the auctions with an R are just issuing additional TIPS based on the last auction? And does that also mean that the maturity date will be less than the posted amount (by a couple of months)?
From the Google quoting Treasury Direct: "In a security reopening, the U.S. Treasury issues additional amounts of a previously issued security. The reopened security has the same maturity date and coupon interest rate or spread as the original security, but with a different issue date and usually a different purchase price."
SHOOFLY already covered this but as an example, take a look at this video section: kzhead.info/sun/lM6wkpSarKGErX0/bejne.html. You'll see the 29-Year 6 Month TIPS also on offer (under the 10-Year TIPS) - that is a reopening of the 30-Year TIPS that were newly issued in Feb 2022. You can also find more info on the new issues vs reopenings here under "Auction Frequency": www.treasurydirect.gov/instit/marketables/tips/tips.htm
Might you cover TIP ETF's and if DRIP on them is wise right now?
I've added it onto our video list!
So, in the long term, it would appear TIPS are generally superior to I bonds. With I bonds, interest is linked to the CPI-U, but you must pay federal taxes on redemption, so you effectively did NOT keep up with inflation. With TIPS, your principal is linked to the CPI-U, but you also get an interest payment on top of that, which offsets some of the federal taxes you'll need to pay, which makes it slightly better than I bonds. That's how I'm seeing it anyway. Or am I wrong? The drawback is the potential risk of loss if you need to sell early on the secondary market.
TIPS just turned into positive yield territory recently. If they work for you, great. If your goal is inflation-proofing your excess cash with no loss of principal - not necessarily so great in our view. You've already hit on the point - selling before maturity in a rising interest rate environment like we're currently in. Just ask anyone who's trying to sell their "old" TIPS in the secondary market right now.
What is inflation factor? How does it play a role on my decision making?
This video didn't have an option for close captioning. Can you add it please?
KZhead will add this shortly - it can take anywhere from a few hours to a few days.
Where do you view the TIPS rates???
Do you recommend tip ETFs like VTIP 0:02
My preference is for individual TIPS/ bonds vs ETFs. Not sure if you've seen this video, but I explain why: kzhead.info/sun/eLaehclwrKatpKM/bejne.html We do have some ETF videos planned, but it will take awhile for us to get to them at this point.
I am a single woman and I bought 10K in I bonds in May. When can I purchase more I bonds? Thank you
Jan 2023
In case anyone is interested, I recently moved some extra cash into a Credit Karma Money (MVB Bank) online savings account while waiting out the first of the year to purchase another I Bond. The interest rate right now is 2.73%... vs the 0.01% I'm getting on my accounts at my regular bank.
Thanks for sharing
I would prefer a guaranteed rate of interest of 5 plus percent through a MYGA or 4.5 to 5 percent with a bank CD I do like IBonds however
Thanks for sharing!
I don't understand the use TIPS play in an overall portfolio or retirement plan. From 2010 to 2020 the inflation rate was under 2%. That seems like not such a good return on your investment. Am I missing something?
TIPS, like I-Bonds, are the inflation-protected part of your portfolio (if that's part of your financial strategy)
The name of the game is the preservation of capital.
Didn't really explain why you would buy Tips vs. Treasuries. You mentioned that if had " a million dollars" you may go with TIPS since there is no limit; however, why not T-bills or notes since they also don't have a limit.
TIPS protect you against inflation, T-Bills & T-Notes don't
made request for 20000 tips treasury direct they withdrew 20500 from my bank then recorded that i had 20000 in tips What do I not understand on this transaction I seem to have lost 500 buck
Did you find out why?
What did your initial principal value turn out to be? If it starts at 20500, that should be a good (or fair) thing at least.
I did not understand why the value of TIPS go down when the interest rate goes up. It is a good thing for TIPS, right, if the interest rate goes up, you get more money back. Then, why does its value goes down in the secondary market?
TIPS behave - for the most part - like normal bonds. When interest rates go up, their price goes down.
Pretend you are selling your TIPS with its current interest rate attached to it and you will understand it. Say you want to sell me a $1,000 TIPS that pays a 2% interest. But, at this time of your sale, interest rate has gone up, and a $1,000 TIPS pays 4%. So, because your TIPS only pays a 2% (less than in current market) I will buy your TIPS at a "discount", so you will not get the $1,000 your TIPS (initial purchase) was worth. It's easier to understand it when you reason it in terms of bonds, but it's basically the same concept. Hope it helps.
@@RAAC60 Now it makes sense. Thanks!!!
Please make a update info for tips I have lost 60000 in tips I hate them
But of you let the TIPS mature then you dont loose principle. So i dont understand why you want to sell them instead of maturing if you are saving. Or is this video more for income on interest? I don't get why you would buy TIPS of you plan on selling the assets outside of emergencies.
Am I missing something here? Invest $1,000 to get $5 back a year? You can make a lot more money in the stock market or even a CD.
I'm in the same boat... is the value here the adjustment/protection from inflation. It seems like a good move to preserve capital, but not necessarily grow it.
Just buy the TIP etf. Why go through all of this nonsense on treasury direct!?
It’s a personal choice - similar to when someone chooses to purchase Apple vs an index fund that contains Apple. We’ll be doing some vids on TIPS ETFs as well, so stay tuned.
The ETF changes price according to overall interest rates, not directly according to the CPI. Please look at a chart of TIP or any other such ETF to see that TIPS ETFs are totally different animals than TIPS themselves.