AboutDr. Joseph de Beauchamp Expertise Over the decades, I have taught the MBA schools in this subject. I have published on over 2000 public companies. I love to help provide information to the individual and company.
I would be interested to know your thoughts on ginnie maes considering that "no interest" loans could result in considerable default if the housing market takes a down turn...and what do you think of them, in general? Also, what do you think of inflation protection funds such as Vanguard's VAIPX? Thank you very much for your advice.
Carlos
Answer VAIPX might have inflation protection to it, but it is nothing more than a bond fund. Bonds will fall when interest rates move upward, and interest rates go up with inflation. Therefore, this fund will fall with any increase of interest rates or inflation. The longer the term of the bonds, and this fund has long term bonds, the greater the change in value. The lower the payment on the bonds, the greater the change on the values with higher interest rates. Therefore, Ginnie Maes will change less with higher interest rates than the US Bonds in the VAIPX since they have higher pay out rates. If Ginnie Maes stop paying a payment, then they will change more.
I look for interest rates to continue upward and so inflation for as long as the next 20 years. Therefore, any of these bond funds will not perform well.
