Any tips on TIPS

[mcrews]

Hello all,

First -- my search for TIPS came up with tips not TIPS (Treasury Inflation Protected Securities) so apologies if this has been covered.

I'm having issues with US TIPS. The problem is that their is an additional piece of information because the principal is accruing value via the CPI adjustment, which is in the form of an index factor.

Example:
CUSIP: 921828MY3

Price on 8/27/14 was $100.453 (or for me $1004.53). The face value is $1,000 but the actual cost is listed at $100.925 (or for me $1009.25). I believe the commission is the spread between quoted price and price paid. The actual cost though also includes the Inflation-Indexed Factor of 1.09955. Therefore the following is what I need to input into FM:

Market Price * Inflation Factor * Quantity + Accrued Interest + Commission

1004.53 * 1.09955 * QTY + Accrued Interest + Commission (i.e. Difference between actual cost and cost based on market price)

The quote price will only pick up the market price but isn't able to factor the index factor.

Any help is appreciated!

Thanks,

Matthew

[Mark]

Hi Matthew,

Unfortunately, Google search is case insensitive... There is a discussion about this you might like to read here:

viewtopic.php?t=1566

Unfortunately, FM doesn't currently support tracking this inflation factor. Thinking about this again, if you only had a handful of these inflation factors to track, you could utilize the multiple currency feature. You would assign each TIP with a certain inflation factor to a non-default currency. You could then set up an exchange rate investment to track this inflation factor, essentially using this as an exchange rate. This wasn't the intended use of this currency feature, but it would work out if you don't have too many inflation factors to track. There is a limit of 25 total currencies. For a tutorial on using this multiple currency feature, see:

https://www.fundmanagersoftware.com/tut ... video.html

[troscher]

If you are holding the shares the only things you should be concerned with are your total purchase price = price of shares x total shares purchased +commissions / total shares purchased. and the same formula for the sell side. all the rest doesn't matter since you do not determine the inflation factors, the price (unless you place limit order) or the spread.

If all you are doing is tracking the index then none of the other stuff matters since the index is the index and the creator of the index is the one who sets the initial parameters and then makes any adjustments going forward.