Investing - Theory, News & General • Re: Long term TIPS real yield at 3%

I would suspect the reverse of being "all in" on nominals as unwise as well -- which I was.

High level, I think it is fine to only use risky nominal bonds in risk portfolios, and only use roughly-liability-matched inflation-adjusted bonds in real liability-matching portfolios. Some people might also call a risk portfolio an "accumulation" portfolio, and a LMP a "withdrawal" portfolio.

I won't belabor the details, but the explanation for this is really pretty simple conceptually. Risky nominal bonds are risky in a way that at least might do interesting things for a risk portfolio. And then using liability-matched inflation-adjusted bonds for real LMPs is sort of like using a screwdriver to drive screws--the tool in question was designed for exactly that purpose.

The "puzzle" to me is why isn't this just the final answer, like why are we even still discussing this?

And I think that ends up a complicated social/psychological story that at its core reflects the effects of the long bull run for high-quality USD nominal bonds that started in the early 1980s. Although in theory people here are supposed to avoid performance chasing and recency bias, once a period of relatively good performance lasts even a handful of years, a bunch of people here will start talking about it maybe just being permanent. And something like 20 years? 30? 40? Then lots of people here will just insist that length of relatively good performance is no longer recent, it is permanent.

Statistics: Posted by NiceUnparticularMan — Fri Jul 31, 2026 8:59 am