T. Rowe Price Mutual Funds: T. Rowe Price Inflation Protected Bond Fund (PRIPX)
Type: Bond fund
With all the uncertainty surrounding interest rates and bonds, I’m not willing to play with fire.
Warren Buffett stated in his 2013 shareholder’s letter that the average investor should invest 90% of their funds in a low-cost S&P 500 index fund and the rest in short-term government bonds. The fund that I recommend to take care of your bond allocation is the T. Rowe Price Inflation Protected Bond Fund (PRIPX), which invests at least 80% of its assets in inflation-protected bonds.
You’re not going to get rich owning this fund, but your principle will keep pace with inflation.
The fund’s composition consists almost primarily of Treasury inflation-protected securities (TIPS) with weighted average maturities of almost nine years and effective durations of close to seven. TIPS are backed by the U.S. government, so your funds are safe and secure.
Over the past five years, PRIPX has achieved an annual total return of 4.5%. This kind of steady-as-you-go pace is exactly what Buffett intended when he made the aformentioned statement.
For those keen on overweighting stocks as you get closer to retirement, this is a good counterbalance.