I bought into FINPX on Dec. 8, 2008, when the price per share was $10.25. I am selling today when the price is $12.16. This is a tax-free account. That is a capital gain of 18.6% over three years, above and beyond the regular interest distributions.
Honestly, I did expect some capital gain in this fund, because I was buying in the heart of the U.S. financial crisis. But in reality, the capital gain is the reason I am selling. My feeling is that TIPS yields are well below the historical norm, and eventually the trend will return to normal. This is the case with all Treasury issues, not just TIPS. This is the last TIPS mutual fund I own. I don’t own a TIPS ETF.
(As I have noted before, I do advocate buying and holding TIPS to maturity, either through TreasuryDirect.gov or in a tax-free retirement account. I am not dismissing TIPS as an investment, quite the contrary, I still a large portion of my portfolio in TIPS and I Bonds. But I feel TIPS mutual funds and ETFs are reaching a risky point.)
So, where did I reinvest this money? In another ‘boring’ investment, Fidelity Total Bond Market (FTBFX). The other fund I considered was Fidelity Intermediate Bond (FTHRX), which tracks very close to the Total Bond Market.
Here is a chart of the performance of these three funds over the last two years:
Amazingly, all three funds have a very similar capital return (and a very nice return) over the last two years. But the FINPX TIPS fund shows much stronger swings, and is on a very strong upswing right now. That is why I am exiting.
I prefer the boredom of the Total Bond Fund. Boring is good.
The TIPS fund is booming with the current surge in Treasury securities. I think that will pass. When it does pass, and TIPS yields return to a more historical level, I would be fine with returning to FINPX.