I-Bonds investment

I’m putting this in it’s own thread rather derail the thread it came from.

Armchair Biologist wrote:
Don’t forget about I-bonds. They are adjusted to inflation. If you buy them right now through April you’ll get a guaranteed 6 month return of 7.12%. Every 6 months the rate changes based on inflation. The only caveat is that you have to keep them for a minimum of 1 year. If you cash them after 1 year, but before 5 years, you lose the last three months of interest. That being said, as long as inflation is high, and you don’t need the money right now, it’s a win-win….even if you cash them and lose the last three months of interest. There’s probably not any investments that’ll return 7.12%in the next 6 months that guarantees your principle back.

I know, probably not the best place for financial advice but what the heck.

If a guy had a few $grand$ laying around in savings drawing diddly for interest, I-Bonds seem to be a decent place to invest some extra cash that is safe and not needed for the foreseeable future.

Thoughts?

Only draw back is if you do not have a trust fund or a business you can only invest up to $10k. You would be making only $712 a year till May 1st when the rate changes or stays the same. Only have to pay federal tax no state or personal taxes is also good here in MN.
The average stock market gain over 20 years is like 8.5%

bigcrappie wrote:

Only draw back is if you do not have a trust fund or a business you can only invest up to $10k. You would be making only $712 a year till May 1st when the rate changes or stays the same. Only have to pay federal tax no state or personal taxes is also good here in MN.
The average stock market gain over 20 years is like 8.5%

Where can you purchase I-Bonds?

Google Treasury Direct. It’s the only place to purchase I Bonds that I know of. Like the OP, I think I Bonds are a great alternative to money you would otherwise have in a savings type account. Just do your homework and understand what you are purchasing before you pull the trigger.

If you just have money lying around in a savings account that you don’t need for over a year, then yes, I think it’s a great idea. I-bonds compound semi-annually so after the first 6 months of 7.12% the interest is added to your principle and you earn interest on that amount.

Even if inflation goes down in the following 6 months to, say, 3.5%, that’s still better then a savings account. The key is to keep it in there until inflation decreases to the point that it’s no longer an attractive investment then you cash them in.

Like BigCrappie stated, you can only invest 10k max on treasury direct online. I believe you can actually put 15k in if you buy 5k of physical bonds (which you can do with your tax rebate, if you have one). I think physical bonds are a pain so I just invested virtually and stayed under the 10k cap.

It’s about as safe of an investment as you can get. It’s true that the stock market has averaged better returns. However, that’s over the long term. You can have multiple years in a row of low to negative growth, then one huge year of growth. If you miss out on that one year you can lose money. That’s why time in the market is very important, so you don’t miss the huge gains.

It seemed like the right move for me.
I invested quite chuck of change $$$$$ that was just sitting in savings and not getting diddly squat for interest.
What I invested, I won’t need for more than a year so it works for me and the interest I do get will beat the heck out of what I was making on it.
Actually, I hope to keep it there until after I retire and will make a nice little, “mostly” untaxable slush fund.

I also don’t see inflation going down anytime soon so the interest rate should stay up there for a while.
Will have to see how I faired in my 1 to 5 year plan.
Good tip Armchair Biologist!

I thought I’d bring this thread back. The new rate for the next 6 months is 9.62%. A new record I believe. Beats any bank savings rate by a bunch….

https://www.cnbc.com/2022/05/02/i-bonds-to-deliver-a-record-9point62percent-interest-for-the-next-six-months.html

But it’s kind of said when we get excited about an I bond that is not only created by the government but backed by taxpayer dollars also.

good to know, thanks Dirk. my moneymarket account has turned to dogshhhh so might have to try this? i really wish you could buy more than 10k tho.

eyeguy507 wrote:

good to know, thanks Dirk. my moneymarket account has turned to dogshhhh so might have to try this? i really wish you could buy more than 10k tho.

Ya, me too. Got a wife? You can each buy one. Know the rules of I bonds before you buy – you have to hold them for a year, redeem before 5 years you lose the last three months interest, etc. Still beats any money market.

Most of my money is tied up right now. Wish that wasn’t the case

Can’t buy enough to make it worth while

grizzly wrote:

Can’t buy enough to make it worth while

I keep debating that actually and I keep going back to that conclusion. I could be wrong, just doesn’t add up to be worth it.

If you have a significant amount of cash that the 10-20k tied up for that long wouldn’t matter, then Maybe I can see going ahead with the bond investment. But if you would take your liquid money or the majority of it and stick it in one of these, then I would say no.

Chance of this market turning to an upward trend within 18 months at most are pretty good I feel. Not many options for people to put there money into with the potential of “decent” returns. A lot of equities are oversold already and if they drop further that just makes the entry point that much better. Stockpile your cash for now and be ready to buy solid companies/ funds / index funds when the trend turns positive, and you will surpass that 10 percent no problem.

Now, if you don’t have a taxable brokerage account to buy equities and don’t want one, but have a savings account with cash just sitting there or under your mattress, then an I-Bond would be not a bad idea for some of it.

But as usual, do your own research and be comfortable with anything you buy!

I’m a pretty conservative investor. 9.62% is a pretty solid return IMO. Thats a free 2k guaranteed between my wife and I in a year. Certainly a lot better than my return in the market over the past 12 months and I’m mainly in the safe S & P 500

I believe the limit is an annual limit. So if you are married you and your wife can do $20K/year. If inflation stays high, you can keep adding to your investment in future years. Tough to beat 9+% return with minimal risk…

I like the idea as well…. Keep in mind that if you sell it in less than 5 years you surrender the last quarter’s gains – verify and study as pointed out already.

crappie55369 wrote:

I’m a pretty conservative investor. 9.62% is a pretty solid return IMO. Thats a free 2k guaranteed between my wife and I in a year. Certainly a lot better than my return in the market over the past 12 months and I’m mainly in the safe S & P 500

Is that 2k in 5 years off 20k or 2k per year for 5 years?

Should be 2k per year for 5 years.
Plus interest on the interest for 5 years.
That’s at 10% rounding up from the 9.62%.

Chuck Melcher wrote:

I like the idea as well…. Keep in mind that if you sell it in less than 5 years you surrender the last quarter’s gains – verify and study as pointed out already.

So if me and th wife kept 20k for 5 years and the rate stayed at 9%, we could sell and walk away with close to 10k?

The rate you buy it at stays the 6 month period in which you buy it. Changing every six months,for as long as you hold the note. Minimum of 1 year, up to 30. Interest is paid every 6 months.

The current rate is good till the end of September 2022.

Can this interest crash since it’s government backed.

the_hat wrote:

The rate you buy it at stays the same for as long as you hold the note.

That, I don’t believe is correct. The rate changes. There are 2 factors that determine the interest rate.
I would check out Treasury Direct for the calculation used.

👆 fixed it 👆⬆️

The 9.62% is good for 6 months. Ater that the rate is readjusted. If inflation falls to 0% you could earn 0% for the following 6 months. For me, it still is worth it. Worst case scenario for a one year period is 9.62% for six months, 0% for the following six months, and a 3 month penalty for taking my money out early. Still is way more than what I’d earn in a money market or CD. To each his own.

dirk-w. wrote:

The 9.62% is good for 6 months. Ater that the rate is readjusted. If inflation falls to 0% you could earn 0% for the following 6 months. For me, it still is worth it. Worst case scenario for a one year period is 9.62% for six months, 0% for the following six months, and a 3 month penalty for taking my money out early. Still is way more than what I’d earn in a money market or CD. To each his own.

It’s been a little bit since I looked but I don’t believe the rate has ever fallen bellow 3.xx%.
So I don’t think the odds of it ever being 0% are very good.

Dirk – Is that what you see too, on their charts.

Edit: Now I was wrong. Dirk – don’t bother. I see they have a historical chart that shows it did hit 0% for a 6 month period back in 2015. It kinda bounces around.
As stated a few times, these are not for everyone. If I was 30/35 years old or even 40/45…I would not buy bonds as your chances of getting a better yield, long term, is the market.

Another heads up forget about any customer service on these. Wait times to talk to them can be over 2hrs. Also you make an error on a purchase for some reason they hold your money 6-8 weeks. Have to love government run entities.

As stated a few times, these are not for everyone. If I was 30/35 years old or even 40/45…I would not buy bonds as your chances of getting a better yield, long term, is the market.

Agree. ⬆️ Entry level looking real good in months upcoming.

The wife and I are each going to buy some. Our financial advisor said it’s not a bad idea…yet it is also not a get rich type scheme. Diversification is the best thing with monetary portfolios.

Land, Stocks/Mutual Funds, Roth Contributions, HSA, HCSP, a few old crappy CDs, and now some I Bonds are where we’ve stuck our money. If the real estate market ever takes a dump (which I don’t see too soon given the housing shortage), we will buy back into a small rental property.

No shiny new Ranger boat or new concrete queen pickup in the works, but my family will someday thank me for it.

haleysgold wrote:

As stated a few times, these are not for everyone. If I was 30/35 years old or even 40/45…I would not buy bonds as your chances of getting a better yield, long term, is the market.

Correct, but they would be a real good thing for kids and grandchildren. Instead of buying toys, buy them these. They will thank you when they are older