Inflated Anxiety
MY EMPLOYER���S 401(K) plan is great, with a generous matching contribution and lots of investment options. Those looking for even more choice can open a brokerage subaccount within the 401(k), allowing them to buy thousands of securities.
I���ve stayed away from the brokerage option, in part because I feared the extra choice might affect my investment discipline. But my growing anxiety about inflation forced me to reconsider.
I want a predictable cash reserve to cover my expenses for the next 10 years, independent of how the financial markets perform. That���s why a large portion of my 401(k) is invested in Vanguard Short-Term Bond Index Fund (symbol: VBIPX). Problem is, while the fund should hold its own in a broad market decline, it does little to preserve my money���s purchasing power.
Everywhere I look, I���ve been noticing price creep. Initially, I took it as temporary phenomenon, the result of a post-lockdown spending surge. But the inflation spikes of recent months have spooked me. My anxiety kept rising despite the Federal Reserve���s insistence that this was only temporary. I���ve always felt that even the Fed���the expert of experts���has a hard time predicting and controlling inflation.
To tame my anxiety, I opened a brokerage subaccount in my 401(k). The process was simple and quick. In a few days, I was able to raise cash by selling a large portion of my Vanguard Short-Term Bond Index Fund. I used the proceeds to invest in inflation-indexed Treasury bonds through another low-cost Vanguard fund (VTIP).
Was it a good move? My rational self is half-convinced. But my emotional self couldn���t be happier. Sometimes it feels good to have a little insurance.
I���ve stayed away from the brokerage option, in part because I feared the extra choice might affect my investment discipline. But my growing anxiety about inflation forced me to reconsider.
I want a predictable cash reserve to cover my expenses for the next 10 years, independent of how the financial markets perform. That���s why a large portion of my 401(k) is invested in Vanguard Short-Term Bond Index Fund (symbol: VBIPX). Problem is, while the fund should hold its own in a broad market decline, it does little to preserve my money���s purchasing power.
Everywhere I look, I���ve been noticing price creep. Initially, I took it as temporary phenomenon, the result of a post-lockdown spending surge. But the inflation spikes of recent months have spooked me. My anxiety kept rising despite the Federal Reserve���s insistence that this was only temporary. I���ve always felt that even the Fed���the expert of experts���has a hard time predicting and controlling inflation.
To tame my anxiety, I opened a brokerage subaccount in my 401(k). The process was simple and quick. In a few days, I was able to raise cash by selling a large portion of my Vanguard Short-Term Bond Index Fund. I used the proceeds to invest in inflation-indexed Treasury bonds through another low-cost Vanguard fund (VTIP).
Was it a good move? My rational self is half-convinced. But my emotional self couldn���t be happier. Sometimes it feels good to have a little insurance.
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