This is a question regarding dealing with price fluctuations and interest rate risk while holding a TIPS fund. In another thread, it was stated, to the best of my understanding, that a way to minimize this risk is to hold the TIPS fund (may also apply to any bond fund, I don't know) for two times the average duration of the fund minus one year. So, if an intermediate TIPS fund has an average duration of six years, hold it for 12 years minus one year equals 11 years. My question is: is this guideline effective if there are random withdrawals (say up to one per year in varying amounts not exceeding 3% to 4% of the initial investment) from the fund over the 11 years, or is the assumption that this is a buy and hold investment for the 11 years? (P.S. after the 11 years, the fund would have a remaining balance of at least 45% to 50% of the initial investment in inflation adjusted dollars).
Statistics: Posted by Prudence — Wed Mar 20, 2024 9:51 am — Replies 1 — Views 28