Kiplinger reported in a thorough article that,
Should I buy TIPS now?
Some money managers will tell you that any time is a good time to buy
TIPS as a hedge against inflation and that these bonds should always
account for at least 10% of your fixed-income portfolio.
Another strategy could be as a market-weighted portion of your portfolio. According to Vanguard rep, TIPS account for about 1% of the market. They point out that TIPS, in short supply, are more susceptible to supply and demand fluctuations than other securities.
I've also found some very good information, albeit annoyingly fragmented, through this interview with Vanguard Principal John Hollyer, co-manager of Vanguard Inflation-Protected Securities Fund and the article's (fragmented) links:
What are the benefits of including TIPS in your portfolio?
There are two main benefits of TIPS bonds. The most unique features of
TIPS are that they're essentially a Treasury (Treasuries dominate the
U.S. dollar market for TIPS), and secondly they're indexed to
inflation, so two of the key risks for bond investors --
credit/default risk and inflation risk -- are addressed by these
securities. I characterize them as the long-term, risk-free rate.
These bonds are free of those two risks, and that gives them some
interesting properties. The mitigation of inflation risk through
indexation causes them not to trade in lock-step with other bonds.
If we pull back for a minute into a portfolio context, we have an
asset like inflation-indexed bonds that have expected returns not that
much different than long-term treasury bonds, but a pattern of returns
that will be somewhat different. Therefore, they can be a diversifying
asset less correlated with the bond market, and help to reduce the
overall volatility of the portfolio.
I'll probably try equally dividing my bond portfolio between international bonds, U.S. non-TIPS, and TIPS.