If you are concerned about inflation and do not need to squeeze every last basis point of return from the non-equity portion of your portfolio, consider some TIPs. I recently bought the 4/15/29 with a 3.875% coupon and a YTM of 1.85%. (Higher coupons are generally considered less desirable because of the reinvestment risk but this was the highest YTM at the maturity that I wanted.) That would be 1.85% plus inflation. Most of the time the YTM on TIPs is near or even below 0%. Mr. Market has decided that inflation is dead so nobody wants the inflation protection provided by TIPs.

This was the 5th rung in a ladder of TIPs intended to meet my living expenses over the next 5 years. The first 4 years were purchased last October with an average weighted YTM of 2.65%.

You'll want to do this in a tax deferred account. Otherwise you will wind up paying tax on the inflation adjustments without getting the cash.

Berkshire Hathaway FAQ

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