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Thanks for the advice, esp. Jack and Blacktreechaser.

I have some reflections and a question:

Reflection: I had not thought about the timing of interest rate jumps, and therefore potential loss of NAV on a bond fund. I was only looking at the upcoming 3-5 year period with gradual changes to interest rates. It makes sense to be leery of bond funds as I could reap low yields until just before needing the money, interest rates could rise, and I could take a significant hit to principal. That is not a risk I am willing to take with this money.

Question: So why might the performance of the fund that I do own, VIPSX (Vanguard Inflation-Protected Securities) which invests in inflation-protected treasuries, be so strong? I mean, the NAV has appreciated by roughly 8-10% over the last 6 months while interest rates have stayed pretty flat (I think). Is this just supply and demand? I read somewhere on this board that Chinese gov't may be pouring money into TIPS. If so, how does one understand the underlying value of the fund?

End result: I have some research to do for the other options. So far, I can't find CDs that will earn much more than 1%, same with my savings account. I'll still look into treasuries and individual bonds (although I am not familiar with how to evaluate). I may need to be satisfied with lower yields. I'll probably be most interested in US treasuries I-bonds to protect against inflation.

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