After all the prep work, this time we pull up our sleeves and really go about buying some TIPS on the secondary market.

First you need a brokerage account. If the brokerage firm you use is a small discount broker that does not handle bond orders, for example Zecco or ShareBuilder, you need to find a real brokerage firm that does. If you have accounts with several brokers or if you are buying a large amount, you may be interested in finding out which broker is most cost effective for your order. Unlike buying stocks, ETFs or mutual funds, commission is only a small part in the cost of buying bonds on the secondary market. The largest cost is the markup included in the quoted price. The markup is the price difference between what institutions pay for wholesale trades and what your broker charges you for retail purchase. The markup comes from your broker and/or the dealer from which your broker gets the bonds. A broker that charges you no commission but adds a big markup to the price can be more expensive than a broker that charges you a commission on a smaller markup. Your broker discloses the commission but it never discloses the markup.

This table lists the commission from a few discount brokers for purchasing TIPS on the secondary market.

Many brokers use bond price quotes from BondDesk Group. BondDesk is a platform on which some bond dealers post their prices for retail investors. However, two brokers both using BondDesk don’t necessarily show the same price for the same bond. Your broker can add a markup to the BondDesk price before showing the price to you. Fidelity and Schwab don’t use BondDesk.

Here are the prices and total bottom line costs I got when I priced one particular bond online when the market was open the other day. I tried to make them comparable apples-to-apples. I opened multiple browser windows and requested the quote within a few seconds of each other.

The numbers in parenthesis are the additional money I’d have to pay if I purchased from a higher cost broker. Fidelity happened to have the lowest cost. That doesn’t have to be true all the time. Remember these were only for one particular bond on one particular morning. Much like when you buy a big screen TV, this week Sears may sell a Sharp 37" cheaper but Best Buy may sell a Toshiba 52" cheaper. And next week it could be just the opposite. However you can see the effect of commission versus markup from this exercise. Vanguard charges commission on top of prices from BondDesk whereas E*Trade does not. But the price from E*Trade was higher. If I bought one bond, Vanguard was more expensive. If I bought 10 bonds or 100 bonds, Vanguard became much cheaper than E*Trade. The lack of pricing transparency on the secondary market is really unfortunate. It makes it difficult for you to comparison shop.

Most of the online quotes are take-it-or-leave-it. You cannot enter a Good-Til-Cancelled limit order and wait for the price to meet what you wanted. Sometimes the initial online quotes are not even executable. One time I saw a quote from Vanguard but as soon as I try to place an order to buy, the price went up. But when I tried to place an order to sell, the price went down. Some brokers like Fidelity let you enter a limit order within a narrow band. Even those orders are fill-or-kill which means if they want to take your price they will do it, otherwise they just throw your order away. If you want to change your limit price you will have to enter a new order. If you want to get a better price than the online quote, it doesn’t hurt to try a limit order below the ask price or slightly above the mid-point between bid and ask prices. Sometimes it takes a few tries.

Trading bonds online is still relatively new to brokerage firms. Most of them also offer rep-assisted trades by phone at a higher commission. Is it worth it to place the order by phone? The answer is probably yes because the phone reps may have access to different systems that provide a better price than what you can get from the online system. This becomes important especially if you are buying a large amount. The price difference can negate many times the ~$25 extra commission for phone orders. When you talk to the rep by phone, it’s helpful if you know the CUSIP number for the bond you are interested in. CUSIP stands for Committee on Uniform Security Identification Procedures. The 9-character alphanumeric CUSIP number uniquely identifies a bond like a ticker symbol does for a stock. I have the list of CUSIP numbers for all TIPS bonds on the market today here:

Spreadsheet: TIPS CUSIP List

Give the CUSIP number to the phone rep and ask for a quote. Compare it with the online quotes from the same broker or even a different broker. Challenge the phone rep to give you a better price than the online quote.

This concludes the Guide to Buying TIPS On the Secondary Market. I hope it answers all your questions about buying TIPS on the secondary market. If not, please feel free to leave a comment or use the contact me page to send me an e-mail.

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Software picked, likely related articles at The Finance Buff:

• Buying TIPS On Secondary Market, Part 1: Why Secondary Market?
• Buying TIPS On Secondary Market, Part 4: What to Buy
• Buying TIPS On Secondary Market, Part 2: Understand Quotes

Suppose you decided this is the time to buy some TIPS on the secondary market. But which one should you buy?

At the time of this writing, there are total of 27 TIPS bonds on the market, with maturities ranging from 2009 to 2032. Much like when you buy a flat screen TV you have to decide roughly what size you want: < 30″, 30″-40″, 40″-50″, > 50″ etc, when you buy TIPS, you have to decide what maturity range you want. A short-term TIPS (< 5 years) is less risky and it lets you deploy the money elsewhere if your plan changes, but it protects you against inflation only for a shorter period of time. A long-term TIPS (> 10 years) is more risky and you are locked in for a long time (we are only talking about buying and holding to maturity here, not trading bonds). But a long-term TIPS usually, but not always, has a higher yield and it gives you protection for a longer period of time. An intermediate-term TIPS (5-10 years) is just somewhere in between short-term and long-term. No hard and fast rules here. You pick the maturity range that suits you.

Of course price and yield matter as well. That’s where the yield curve comes in. A yield curve is a chart with the bonds’ maturity plotted on the X axis and their yield to maturity plotted on the Y axis. Fidelity produces a nice yield curve when you look up quotes on its web site.

Each blue dot represents a TIPS bond. Right now the yield curve is “inverted,” which means the short-term bonds have higher yields than the longer-term bonds, whereas when the yield curve is “normal,” it’s positively sloped like the other lines in the chart are.

By looking at the yield curve and the quote table, I see the long-term TIPS with 15 years or longer in maturity are yielding 2.2% – 2.3% whereas the shorter term 3- to 8-year TIPS are yielding 2.3% – 3.3%. If I were to buy TIPS on the secondary market today, I would buy in the 3 to 8 years range because I already have some long-term bonds. In addition, the yields on the long-term bonds are not high enough for me to want to buy more. I don’t buy TIPS with less than 3 years in maturity on the secondary market because having inflation protection for only one or two years isn’t very meaningful to me. Within the range of 3 to 8 years, I still have some tough choices to make. For example should I choose a bond maturing in 5.5 years yielding 2.84% or a bond maturing in 7 years yielding 2.47%? I calculate the so-called forward rate, which is the rate I must earn in the remaining 1.5 years after my 5.5-year bond matures in order to match the 7-year bond. It’s done as follows:

((1 + 2.47%) ^ 7 / (1 + 2.84%) ^ 5.5) ^ (1 / (7 – 5.5)) – 1 = 1.1%

I think I have a reasonable chance of earning more than 1.1% real when my 5.5-year bond matures. So if I were to choose between these two bonds, I would choose the 5.5-year bond. Here’s a spreadsheet that makes the forward rate calculation easier:

Spreadsheet: Bond Forward Rate

If deflation is a concern, you can also use the spreadsheet in my previous post TIPS During Deflation to see how the bonds behave under different inflation/deflation scenarios. I’m not too concerned about deflation more than five years out.

Finally, don’t over-analyze it. The bond market is efficient. Prices and yields are formed by institutions trading millions of dollars a pop. Whatever calculation we can do with our primitive spreadsheets can be done a thousand times faster by bond traders with their sophisticated computer programs. So pick a bond you are comfortable with and go for it.

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Software picked, likely related articles at The Finance Buff:

• Buying TIPS On Secondary Market, Part 1: Why Secondary Market?
• Buying TIPS On Secondary Market, Part 2: Understand Quotes
• Individual TIPS Or TIPS Mutual Fund

This is part three of the Guide to Buying TIPS On the Secondary Market. Parts one and two are Why Secondary Market and Understand Quotes.

Like when you buy any other bonds, you want to buy TIPS when yields are high and prices are low. There are several places where you can monitor the TIPS market.

Vanguard, Bond Yields. This web page lists the current yields on all kinds of bonds. It used to include specific issues of TIPS in the middle of the page, but right now that section is blank. I’m not sure if it’s just temporarily not available or gone for good. Keep an eye on it. Maybe the data will come back. Although the web page shows a current timestamp, it’s not clear to me when the data were last updated or how frequently they are updated.

Wall Street Journal, TIPS Market Data. This web page from the Wall Street Journal also shows yield on specific issues of TIPS. It’s updated once a day after the market closes. The prices on this page use the 1/32 convention. 99.01 means 99 plus 1/32 which equals 99.03125 in decimal.

Bloomberg, Government Bonds. Instead of showing the yield on every TIPS issue, this web page from Bloomberg lists yields for only four issues as a representative sample. It’s updated in real time when the market is open.

U.S. Treasury, Daily Treasury Real Yield Curve Rates. This web page from U.S. Treasury lists constant maturity yields for four maturities. The yields are extrapolated to exactly 5 years, 7 years, 10 years, and 20 years even if there are no actual bonds that mature at those exact marks. The data are updated daily after the market closes.

Federal Reserve Bank of St. Louis, charts for 5-year, 10-year, and 20-year TIPS yield. Using the same constant maturity yields data from U.S. Treasury, these charts show where the yields have been in the recent past. Because the Treasury changed their extrapolation methodology recently on December 1, 2008, historical comparison crossing the 12/01/2008 date isn’t as meaningful as otherwise. The charts are updated daily with a couple of days lag from the U.S. Treasury data.

Depending on whether you are watching for specific issues of TIPS or the market in general, or whether you want real-time or 1-day delayed data, you may find one data source better than another for what you need.

The question “Is it a good time to buy TIPS now?” can only be answered by you. Like the stock market, the bond market is also unpredictable. Some people say the bond market is even more efficient than the stock market because there are fewer unknowns. If you think the yields are good now, they may become better tomorrow. If you think the yields are too low now, they may become even lower. Respected author Larry Swedroe suggested a shifting strategy in his books The Only Guide to a Winning Bond Strategy You’ll Ever Need and The Only Guide to Alternative Investments You’ll Ever Need. He also shared this shifting strategy in his post on the Bogleheads forum.

Real Yield	% of bonds in TIPS	Maturity
< 1.5%	0%	< 5 Years
1.5% – 2.0%	0 – 25%	5 Years
2.0% – 2.5%	25 – 50%	10 Years
2.5% – 3.0%	50 – 75%	15 Years
> 3.0%	75 – 100%	20 Years

I agree it’s a good time to buy TIPS when the yield goes above 3.0% although I’ve also bought when the yield was between 2.0% and 3.0%. It’s up to you whether you use Mr. Swedroe’s shifting strategy or not.

Another common question about when to buy TIPS is “Should I buy on the secondary market now or wait for the next auction?” It’s a difficult question to answer because nobody has a crystal ball for what the yield will be when the next auction comes around. Let me give a few of points for consideration.

1. When is the next auction for the bond you want? Look at the tentative auction schedule and see what will be auctioned and when. If you want a 20-year bond but the upcoming auctions are for 5-year and 10-year, you will have to wait a bit longer for the auction. By that time the good yields may not exist any more. Or if you want a 8-year bond but they only auction 5-year, 10-year, and 20-year bonds, then you have no choice but to buy on the secondary market. On the other hand, if you want a 10-year bond and one is coming up for auction next week, it makes sense to wait for the auction because you get institutional pricing when you buy from the auction. For more information about the auction schedule, please read my previous post TIPS Auction Step By Step: Know the Schedule.

2. How much more do you pay when you buy on the secondary market? The retail markup is not constant. It varies by time, from broker to broker, and from bond to bond with the same broker. The markup increased dramatically during the market turmoil in 2008. Right now it’s still much higher than what it was before. Use my spreadsheet and find out your all-in price and yield including broker commission. Unfortunately without access to a Bloomberg terminal, there is no good source for real time wholesale market data. You can estimate how much more you are paying over the wholesale prices in a few ways, although none of these methods is perfect.

• Pick a bond that Bloomberg tracks on its web site. Find the retail pricing for that same bond from your broker. Compare the two.
• Compare the current retail price and yield for the bond you want with yesterday’s wholesale price and yield as reported by Wall Street Journal.
• Use the average of your broker’s bid price and ask price as the proxy for the market price. See how much the ask price is higher than the midpoint between the bid price and the ask price.

Because you pay wholesale pricing when you buy from an auction, the market will have to change that much to your disadvantage for you to be worse off if you wait for the auction.

3. Are the yields on the secondary market very attractive now or just so-so? When you pay a markup on the secondary market, the yield had better be worth it. If it’s just so-so, you might as well wait for the next auction.

Let me give a real life example. Suppose I’m interested in buying a 20-year TIPS. At the time I’m writing this, Fidelity shows the ask price at 127.434 and the ask yield at 2.192% for a TIPS maturing on April 15, 2029. Because Fidelity doesn’t charge commission on top of its markup, I can use the ask price and the ask yield as-is. Wall Street Journal shows as of the previous day’s market close, the ask price on the wholesale market for the same bond was 125-17/32, which equals to 125.53125 in decimal, and the ask yield was 2.295%. So I estimate that I pay a markup of 127.434 / 125.53125 – 1 = 1.5% if I buy on the secondary market. Meanwhile the auction schedule shows the next auction for a 20-year TIPS is on January 26, 2009, less than a month away. Because the 2.2% – 2.3% real yield isn’t attractive enough for me to pay a 1.5% markup while the auction is coming up very soon, if I were to make this choice today, I would decide to wait until the next auction. Of course when the auction comes, the yield may drop to below 2.0%, or it may go up to above 2.5%. That’s the risk I decide to take when I make this “buy now or wait” decision.

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Software picked, likely related articles at The Finance Buff:

• Buying TIPS On Secondary Market, Part 1: Why Secondary Market?
• Buying TIPS On Secondary Market, Part 4: What to Buy
• Buying TIPS On Secondary Market, Part 2: Understand Quotes

The price and yield quotes are perhaps the source of most confusion about buying TIPS on the secondary market. Unlike regular (”nominal”) bonds, TIPS are quoted in real price and real yield while the actual purchase is done with nominal dollars. Let’s take a look at an actual quote from Fidelity for one specific bond.

There are a bunch a numbers. What do they mean?

Coupon: 2.000. It means this bond will pay 2.000% annual interest rate. All TIPS pay interest twice a year. The interest is calculated as follows

inflation adjusted principal on the interest payment date * coupon rate / 2

Therefore this bond will pay you twice a year 1% (one half of the coupon rate) of the inflation adjusted principal on the interest payment date.

Maturity Date: 01/15/2016. This is when the inflation adjusted principal will be paid back to you. If you need your money back before then, your only choice is selling the bond back on the secondary market. You can also tell by the maturity date when the bond will pay interest. TIPS always pay the last interest on the maturity date. Therefore this bond will pay interests on January 15 and July 15 every year.

Rating: AAA. All Treasury bonds are rated AAA.

Price Bid/Ask: 96.031/96.965. The first number is the bid price, which is the price the dealer pays you when you sell. The second number is the ask price, which is the price you pay the dealer when you buy. When you are buying, pay attention to the ask price. These numbers are expressed as a percentage of inflation adjusted principal (see Inflation Factor discussed below). The ask price of 96.965 means you pay 96.965% of the inflation adjusted principal if you buy this bond from the broker. Some brokers display the prices in a number followed by a multiple of 1/32. For example 96-31 means the whole number 96 plus a fraction of 31/32, which equals 96.96875 in decimal.

Yield Bid/Ask: 2.620/2.471. These are real (after inflation) Yield to Maturity (YTM) expressed in percentages. YTM is an internal rate of return calculation for all the cash flows from a bond. A real YTM is calculated using cash flows in real terms. The first number is the bid yield, which is the yield you give up when you sell. The second number is the ask yield, which is the yield you receive when you buy. For this bond, if you buy at the broker’s ask price of 96.965, your real YTM is 2.471%.

Inflation Factor: 1.09333. This is unique to TIPS. The principal value of TIPS is adjusted by this multiplier. It’s also called the index ratio. The index ratio changes every day with inflation with a 2-month lag. Around the 17th of every month, when the Consumer Price Index (CPI) number for the previous month is announced, the Treasury department publishes the index ratio for every TIPS bond for the following month. At any point of time, you know what the index ratios will be in the next 15 – 45 days.

When you buy stocks, the unit is one share. When you buy bonds, the unit is one bond. By bond convention, one bond is $1,000 in face value. The inflation adjusted principal is $1,000 multiplied by the index ratio. Therefore the inflation adjusted principal for this bond is $1,093.33. The ever changing index ratio makes your bond keep up with inflation and deflation.

Adjusted Price Bid/Ask: 104.993573/106.014743. These are bid/ask prices multiplied by the inflation factor a.k.a. the index ratio. If you multiply the ask price of 96.965 by the index ratio of 1.09333, you get 106.014743. Because they are a simple multiplication, not all brokers display these in their quotes. Fidelity is showing these numbers here for your convenience.

There is one more piece of data that’s not shown in the quote. It’s called accrued interest. Accrued interest is the interest between the last interest payment date and today. If you buy the bond today, you will receive six months worth of interest on the next interest payment date. But because the current owner owned it between the last interest payment date and today, it’s only fair that they receive a portion of the interest. Therefore when you buy the bond from the current owner, you have to pay them the interest they already earned. Because it’s simply an advance, accrued interest is usually not included in the price quote. If you want to know the all-in cost including accrued interest, you can use my spreadsheet:

Spreadsheet: Buying TIPS on Secondary Market

So altogether, the quote is showing you that if you accept the quote and buy this bond, you will have a bond that

• matures on Jan. 15, 2016;
• pays 2% annual interest rate multiplied by the ever changing inflation adjusted principal;
• has an inflation adjusted principal of $1,093.33
• costs 96.965% of inflation adjusted principal ($1,093.33) plus accrued interest
• gives you a real Yield to Maturity of 2.471% (before broker commission)

In addition to these numbers in the quote, if you use my spreadsheet, you will also see

• the all-in cost including accrued interest is $1,069.80518 per bond;
• if you buy 10 bonds and your broker charges you $40 commission, your total cost for 10 bonds is $10,738.05;
• with the broker commission, your real YTM is now 2.413% (versus 2.471% before broker commission).

We will look at when to buy TIPS in part three of this guide.

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Software picked, likely related articles at The Finance Buff:

• Buying TIPS On Secondary Market, Part 1: Why Secondary Market?
• Buying TIPS On Secondary Market, Part 4: What to Buy
• Buying TIPS On Secondary Market, Part 5: How to Buy

First of all, what does buying TIPS on the secondary market mean? It means you are buying the bonds from someone who already own them. Bond dealers make a market in these bonds. They advertise a price at which they are willing to buy (”bid”) and a slightly higher price at which they are willing to sell (”ask”). This is very similar to how the stock market works. Like stocks, bonds also trade on the market every day at different prices by the minute. But unlike buying stocks, retail investors usually cannot get the current market price when they buy bonds. The market price is reserved for institutions who buy and sell millions of dollars worth of bonds. Retail investors can only buy from retail brokers who often add a markup. On the other hand when you buy TIPS from auctions, you pay the same price as the institutions pay. There is no markup.

Then why should we even consider buying on the secondary market? Because most of the time we have no better choice. The Treasury department only holds TIPS auctions a few times a year (it had 8 auctions in 2008). Because the secondary market is open all year round, sometimes the prices are attractive but there is no auction. If you want to take advantage of the attractive prices, you have to buy it on the secondary market. When Treasury holds an auction, it only does it for one bond. The secondary market has all issues trading all the time. If Treasury is doing an auction for a short-term bond but you want a long-term bond, you either have to wait or you have to buy it on the secondary market.

Because you are buying on the secondary market from an existing owner, not directly from the Treasury department, you need a brokerage account. You can’t do it in TreasuryDirect. Almost any brokerage account will do, although different brokerage firms will have different pricing and commission structures. I will use Vanguard Brokerage Services (VBS), Fidelity, and Schwab as examples in this guide.

TIPS are still bonds, which are not tax efficient. For that reason, they are best bought in a tax deferred account. Using a tax deferred account also makes it easier for tax reporting. In a taxable account, there are issues like Amortization of Bond Premium (ABP) and Original Issue Discount (OID). Because I have never bought individual TIPS in a taxable account, I don’t profess to have a thorough understanding of how to deal with ABP and OID. Read IRS Publication 1212 Guide to Original Issue Discount (OID) Instruments and Publication 550 Investment Income and Expenses, if you are interested. I avoid dealing with them by using a tax deferred account.

In part two of this guide, we will look at how to understand the quotes.

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Software picked, likely related articles at The Finance Buff:

• Buying TIPS On Secondary Market, Part 4: What to Buy
• Buying TIPS On Secondary Market, Part 2: Understand Quotes
• Individual TIPS Or TIPS Mutual Fund

A reader asked about TIPS mutual funds in the comments to my action plan for TIPS. Just like there are mutual funds which invest in stocks, there are mutual funds that invest in TIPS. The Vanguard Inflation-Protected Securities Fund (VIPSX) is a popular choice because of its low 0.20% expense ratio. Similar funds from Fidelity or T. Rowe Price charge double what Vanguard charges. There is also an ETF iShares Lehman U.S. Treasury Inflation Protected Securities Bond Fund (TIP), whose expense ratio is also 0.20%, but it only makes sense if you have a no-commission brokerage account like WellsTrade or Zecco because otherwise you would have to pay brokerage commission for each trade. There’s another newer ETF SPDR Barclays Capital TIPS ETF (IPE) with 0.1845% expense ratio. Vanguard also filed an application with the SEC for an ETF based on its fund. It’s not on the market yet.

Buying TIPS through a mutual fund (or ETF) is a good idea, because it gives you a lot of convenience for a small price. Pros for investing in a fund include:

1. Buy at any time without a transaction fee. Although there is no charge to buy individual TIPS bonds at auctions through certain places (Fidelity, Schwab or TreasuryDirect), the auctions only come up a few times a year. If you want to buy individual TIPS bonds when there’s no auction, you must use a brokerage account. Some brokerage firms charge a commission for bond orders. Vanguard charges minimum $40. You also pay a higher price (”markup”) than the wholesale price when you buy on the secondary market. Or you will just have to wait until the next auction, but the prices will have changed by then.

2. Instant diversification. A mutual fund holds about 20 bonds with different maturities. You get all of them with one purchase. If you are buying individual TIPS bonds, they don’t come on auction at the same time. You must wait for the auctions or pay commissions to establish your positions.

3. Sell at any time without a transaction fee. If you have individual TIPS bonds, there is no fee if you wait until they mature. If you want to sell before they mature, you may have to pay a commission. TreasuryDirect charges $45. Vanguard charges at least $40. You also receive a lower price (”markdown”) than the wholesale price when you sell on the secondary market.

4. Buy or sell for any random amount. Minimum additional investment in the Vanguard TIPS fund VIPSX is $100. Want to buy $456.78? No problem. The individual TIPS bonds are in $100 increments at TreasuryDirect or in $1,000 increments in a  brokerage account.

5. Reinvest interest payments immediately without charge. If you have individual TIPS bonds, you must hold the interest payments elsewhere. Reinvesting in another TIPS bond is also subject to the auction cycles and $100 increments at TreasuryDirect or $1,000 increments in a  brokerage account.

6. Easy tax handling (for taxable accounts only). TIPS bonds in a taxable account have a unique phantom income issue. I won’t go into the details here. The fund shields that issue away from you. You receive regular dividends from the fund and you get a 1099 at the end of the year, just like any other mutual fund.

All of these convenience come at a cost of 0.20% a year for the Vanguard TIPS fund VIPSX. That’s $20 a year for each $10,000 invested. If you have $100,000 or more for TIPS, Vanguard’s fund offers Admiral shares which cut down the expense ratio to 0.11%, or $11 a year per $10,000 invested. It seems very reasonable to me. Why bother buying individual bonds then? Because,

1. Low expenses. If you buy at auctions and hold to maturity, there is no extra expense. If you buy a large amount of TIPS, you can save money by building your own fund with individual bonds. Fidelity, Schwab and TreasuryDirect charge no fee or commission if you buy at auctions and hold to maturity. Even if you buy on the secondary market, as long as you buy long-term bonds in large chunks and hold the bonds to maturity, a one-time commission and markup can be less expensive than having to pay an ongoing expense year after year.

2. Be your own fund manager. You get to decide what maturity you buy. When you buy fund shares you buy a basket. The fund’s (experienced) managers decide what to buy and when to buy. With individual bonds, now you become the (amateur) manager for your own fund. Want short maturities? Buy 5-year notes. Want long ones? Buy 20-year bonds.

I’ve bought all of these before, the Vanguard TIPS fund VIPSX, the iShares ETF TIP, and the individual bonds. They all worked the way they’re supposed to. Right now I’m buying individual bonds and holding them to maturity because I want to save the ongoing expenses.

Buying at auctions and holding to maturity is not that hard. I have a step-by-step guide for doing so. If you buy long-term bonds at least $10,000 at a time, the secondary market can also be cost effective. If the the yield becomes attractive between auctions, I will not hesitate to buy on the secondary market. After all, for a 20-year bond, paying a one-time 1% commission plus markup beats paying a 0.2% expense every year for 20 years.

Follow up posts:

• TIPS Auction Step By Step
• Buying TIPS On Secondary Market

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Software picked, likely related articles at The Finance Buff:

• Bought 20-Year TIPS
• Buying TIPS On Secondary Market, Part 1: Why Secondary Market?
• TIPS Auctions on Jan. 11 and 23, 2007