I have been building a variety of tools over the past few months largely to help me with my investment portfolio and personal life but in this post I am going to tell you how I’m putting some of it all together although this is just going to be one small piece.
I recently built a tool that summarizes YouTube videos. The latest video I summarized is below but I really didn’t watch it, I just got a summary from AI.
The video is about inflation and that’s been one of my major concerns lately as I approach retirement.
I’m not going to post the whole summary but here is a snippet:
This video addresses concerns around inflation, its impact on bond portfolios, and strategies for inflation protection, particularly in light of recent geopolitical and economic uncertainties involving the Federal Reserve.
Key Topics Covered
Inflation and Bonds: Historical Lessons
How Much Inflation Protection to Include in Your Portfolio
Two Golden Rules for Inflation Protection
The video provided some good information but how can I get an independent appraisal for the advice offered in the video? AI to the rescue!
I asked AI to review the “advice” and offer an honest assessment from the standpoint of a financial advisor and economist.
AI Response:
High-Level Assessment
Overall, this is a thoughtful, conservative, and economically literate inflation plan, especially for investors who rely on fixed income or are approaching retirement. It correctly treats inflation risk as structural rather than temporary and frames inflation protection as insurance, which is the right mental model.
The plan’s biggest strengths are:
- Realistic inflation assumptions
- Balanced risk management
- Avoidance of “all-or-nothing” bets
- Strong historical grounding
That said, there are a few important caveats, missing considerations, and implementation risks worth addressing.
What the Plan Gets Right
1. Correct Diagnosis: Inflation Is the Core Risk to Bonds
The document accurately states that inflation is historically the greatest enemy of bond investors and that nominal bonds frequently fail to preserve purchasing power over long horizons inflation_plan.
Economic reality check:
- The post-1971 fiat era has indeed produced persistent inflation across nearly all developed economies.
- Even “low” inflation (3–4%) compounds dramatically over 20–30 years.
- The Fed’s 2% target is aspirational, not historical.
Verdict: Strong and empirically correct foundation.
2. The Swenson 50/50 Rule Is a Sensible Default
Using David Swensen’s 50/50 split between inflation-protected and nominal bonds as a starting point is intellectually honest and risk-aware inflation_plan.
This avoids:
- Overconfidence in inflation forecasts
- Concentration risk
- Regime-dependent portfolio fragility
Planner’s view:
This is a very reasonable anchor allocation, especially for investors without strong macro convictions.
3. Tailoring by Investor Circumstance Is Well Done
Segmenting investors into three groups (less than 50%, around 50%, more than 50%) based on:
- Existing inflation hedges
- Time to retirement
- Income needs
is exactly how inflation protection should be handled inflation_plan.
Strength:
The plan avoids the common mistake of treating inflation hedging as a one-size-fits-all solution.
4. Clear, Accurate Comparison of TIPS vs. I Bonds
The distinctions between TIPS and I Bonds are presented accurately and without hype inflation_plan:
- I Bonds: tax-deferred, limited size, poor for income
- TIPS: scalable, income-producing, operationally complex
Planner’s note:
This realism helps prevent investor disappointment and misuse.
5. Treating Inflation Protection as Insurance (Not Return Maximization)
This is one of the strongest conceptual points in the document inflation_plan.
Inflation protection:
- Is not meant to “win”
- Is meant to prevent irreversible loss
- Should feel slightly inefficient in good times
This framing is psychologically and financially correct.
Areas That Need Improvement or Clarification
1. Understates the Interest Rate Risk of TIPS
While inflation protection is emphasized, the plan does not sufficiently highlight duration risk in TIPS.
Important nuance:
- TIPS protect real purchasing power only if held to maturity
- TIPS funds can suffer large drawdowns when real rates rise
- Investors often panic-sell TIPS during tightening cycles
Recommendation:
Explicitly distinguish between:
- Individual TIPS ladders (safer for retirees)
- TIPS funds/ETFs (more volatile, mark-to-market risk)
2. Overconfidence in “Other Inflation Hedges”
Equities, REITs, and real estate are described as inflation hedges, which is directionally true but incomplete inflation plan.
Key risks not emphasized:
- Equities do poorly in stagflation
- REITs are interest-rate sensitive
- Real estate is illiquid and policy-exposed
- Dividend stocks can lag inflation for long periods
Planner’s caution:
These are probabilistic hedges, not contractual inflation protection like TIPS or I Bonds.
3. Structured Products Mentioned Without Risk Framing
Yield-enhanced products and autocallables are mentioned as income options inflation_plan, but:
- They embed complex downside risk
- They are path-dependent
- They often fail during prolonged volatility or crashes
Recommendation:
Either:
- Add a strong risk disclosure
- Or reposition them as tactical tools, not core inflation hedges
4. No Explicit Discussion of Fiscal Risk
The plan focuses heavily on monetary policy (the Fed) but says little about fiscal dominance, which is arguably the bigger long-term inflation driver.
Missing discussion:
- Structural deficits
- Aging demographics
- Debt monetization risk
- Political constraints on austerity
Economic view:
These factors strengthen the case for inflation protection even further—but they should be named explicitly.
5. Implementation Details Are Thin
The plan is conceptually strong but light on execution details, such as:
- Ladder length for TIPS
- Target real duration
- Rebalancing frequency
- Tax location (taxable vs tax-advantaged accounts)
For many investors, how matters as much as what.
Bottom Line Verdict
Overall Rating: Strong (8.5/10)
This is a serious, disciplined, and defensible inflation plan, especially for:
- Pre-retirees and retirees
- Income-focused investors
- Those scarred by recent bond losses
- Investors prioritizing capital preservation
Main strengths:
- Correct inflation diagnosis
- Balanced philosophy
- Insurance-based framing
- Avoidance of extreme bets
Main weaknesses:
- Underplays TIPS volatility
- Overstates equity-based inflation hedges
- Light on fiscal risk and implementation detail
If you’d like, next steps could include:
- Stress-testing this plan under 1970s-style stagflation
- Translating it into a model portfolio
- Evaluating it specifically for your age, income needs, and tax situation
- Improving the execution framework (ladders, funds, rebalancing)
Just tell me how deep you want to go.
My Thoughts
The obvious thing to do next is to ask AI to provide a better alternative or options or do any of the things it suggested. Of course AI does make mistakes so it’s best to use multiple AI engines if possible and check if they are all coalescing around the same ideas. The workflow here is to gather information from multiple YouTuber’s that are “experts” in their fields, aggregate the data, have AI constructively criticize the information and formulate a final strategy that incorporate all those things into my overall investment portfolio strategy. The key here is that my needs are unique to my circumstances and my investment portfolio so you have to take all the information and determine where it fits in your current financial journey.
AI has already improved my options trading strategy with things that I hadn’t even considered and approaches that were a bit more unconventional. I am now moving on to my bond portfolio and building tools around that hence this post. After that it will be real estate.
Share The Wealth
Are you using AI to manage your whole life? If not, what are you waiting for because you’re just falling behind!