Ask financial advisors whether stocks or Savings Bonds are the better investment for the long term, and all the ones who earn commissions selling stocks will tell you that stocks are always the better investment. The following figure shows the results of investing an equal amount each month in both Series I Savings Bonds and the Vanguard Index fund. The graph begins when Series I Savings Bonds were introduced in September and has been updated through May 1, The thin, black line shows how much money has been invested.

It goes up very steadily because an equal amount of money is added each month. In other words, the total amount invested is whatever equal monthly investment you choose times The upper blue line is the total value of the Series I Savings Bond investment. Note that this line never goes down. The red line that goes both up and down is the total value of the stock market investment, including reinvested dividends.

They make a great foundational choice for the low-risk portion of your investment portfolio. You can skip to the end and leave a response. Pinging is currently not allowed. The comments to this post have their own RSS 2. The story that goes around my family circle — bonds vs. Bonds, one of my prized possessions is a cancelled check from Union Trust Bank Oklahoma dated Nov.

Obviously, the government is trying to make us all go broke during the next recession. Any advice what a good bond vs. Mike — I can tell you in words what the results would show: Under it would be the EE line, under that the money market line, under that the municipal money market line, and then the amount invested line as shown above.

The lines would be on top of one another initially, then they would gradually separate as time went on. Unlike the Index fund line, all of them would be smooth lines with no ups-and-downs. When I was a dumb kid during the late s through the late s, I had all my investment funds, what I had of them, in corporate bond funds. Stocks were too risky for me. I now kick myself seeing all the gain I could have had if I put my money in even a mediocre large cap blend equity fund.

Fortunately, I eventually realized my foolishness and drifted into equities. How many CEOs own stock options? I bet after today, the I bonds may have the lead again. I really appreciate the I-bond feature of not losing principal especially in these times.

If only the base rate was a little higher. TomI have chosen to make I-Bonds an essential part of saving for my daughters education. Giving me tax deferred gains of nearly 6 percent for the current issue of I-bonds. There is no other government insured security or investment vehicle that can do that. I would think that a portion of educational funding invested in I-bonds would make a reasonable cushion against the stock market for anyone.

Okay, I-Bond Rate, 4. Jud — while on any given day there will be a bank offering unusally high teaser rates to get customers, historically, Savings Bonds have been the better investment.

Hi Tom, I like to check out this comparison chart each month, but I doubt if one held the Vanguard in a taxable account that the chart would look the same on an absolute return basis. Or, do you account for the tax-deferred compounding of I-bonds? Hi Mike — you are correct — on a tax-deferred basis the I bonds would look even better. Or another way to think of it would be that the chart compares Series I Savings Bonds to the Vanguard Index Fund held in a retirement account. Well he was right.

Two things bother me so. First, as stated before, these bonds are for inflationary benefit, unlike its counterpart, the EE bond. I feel that the I bond has a lot of better value. The interest is only taxable when you take it out and that may be a long time away. You dont pay any taxes. Next year the same thing BUT, the government raise the tax cut off each year, not a lot but a little.

That may pay for the interest you earned. They are also free from taxes if you use them for higher education. I buy bonds and cash them in every five years and buy new ones. I cash them in because I have no taxable income so I take care of the interest then.

You may be able to do this for children. If you buy bonds in there name at age 10, you cash them in at age If it is there social security number on it they pay taxes. I always recommend seeing a tax perparer first. OK second, why are bonds JUST keeping up with inflation? The I bond is the way to go. The EE bond is so behind the times it is rediculous.

Government - Marketable versus Non-marketable

The only one that makes money on that one is the government. Stick to I bonds. And to think, the government is significantly raising the mortgage limits backed by Freddie, and Fannie? Tom, Yes, that would be a great strategy if only one could overcome the desire to buy the safe I-bonds during downturns. When I was 30 and had a relatively long-term outlook I did not think about such things.

I think it will be six months to three years before stocks find a bottom. Looking to retire jul Fully in dropping equities. Hi Jim — My advice has always been to have a portion of your portfolio in low-risk securities. Jeff — unless the level of TIPS interest rates unexpectedly skyrockets between now and May 1, the I bond fixed rate will be lower after May 1.

Robert — I bonds reflect the prevailing level of interest rates in the market. Some would say the Federal Reserve sets those rates and some would say the market sets those rates based on the supply of money available for investment and the demand for loans. Also, any predictions on what I bonds will do when the adjustment happens Nov. You get the direct government guarantee, tax deferment, and inflation-as-measured-by-the-CPI protection.

If you go with I bonds, I recommend setting up an online account at TreasuryDirect. With paper bonds, security is handled by getting a bank to certify your signature for every little thing you want to do. When the DOW was at 13, I switched all my money in my K to bonds, now that the DOW is down 4, pts when should I pull the trigger and move back into stocks.

Dave — The redemption value of traditional bonds goes down when interest rates go up. Sounds like you must have corporate bonds, as rates on government bonds have gone down and redemption values up since the DOW was at 13, One of the great advantages of Savings Bonds, as opposed to other types of bonds, is that the redemption value never goes down, no matter what interest rates do.

I think you should consider transferring a small part of the money back to stocks on days when the market makes new lows. My bond fund is Pimco Fund Total Return Fund A PTRAX. Any more words of wisdom is appreciated. Prior to October 1 ofthe bond apparently had a composite inflation rate component of 3. On October 1 ofthe I bond must have had a composite inflation rate component of 4. According to the U.

Savings Bond calculator, the bond will have a composite inflation rate component of 5. Rick — The yield tells you what your bond has earned over its entire life, expressed as an annual percentage increase. Dividing it by two gets you nothing. What you seem to be interested in is what the bond is earning now.

The calculator calls that the ratenot the yield. And the rate of that bond is always a bit more than 3. You can see a list of historical inflation adjustments on the chart here.

On another note, I wonder if one advantage of owning U. Savings electronic bonds but it would be much more difficult impossible? Treasury have an iron clad rule with positively no exceptions in that the U. Treasury will under no circumstances redeem any U.

Savings paper bonds if anybody other than the original bondholder does not have physical possession of the paper bonds? Rick — So you understand now that the rate is an annual rate, good for six months. For your other question, see this post on Savings Bonds and civil suits. TOM, I HAVE SERIES I BONDS WITH MY WIFE AS CO-OWNER.

IF SOMETHING HAPPENS TO BOTH OF US WILL MY DAUGHTER HAVE A HARD TIME CASHING THEM IN? IN CASE OF OUR DEATH? Opher — the idea with stocks is to buy low and sell high. Compared to historical values, stocks are now on the low side. They could go lower, but any time the red line on the above graph is below the black line is a better time to buy stocks than otherwise. What can be done if you have more than is allowed? Bob — This post and this post and their comments answer many of your questions.

Savings bond purchases have been subject to an annual limit since Series E Bonds were first issued in Now that the stock market has become less attractive to a lot of retirement age people and the government needs to borrow larger amounts of money, maybe the government would consider reinstating the original limits for purchasing I Bonds.

Who can we contact in government to ask that this be considered? My wife and I are registered together on Treasury direct. Ramon — the TD account only belongs to one of you and only has one SSN associated with it. Tom, I keep hearing Peter Schiff say on the news that the Bond Market will collapse due to government spending that will eventually led to high interest rates and hyperinflation.

Does this mean IF it happens that all bonds will become worthless because government and businesses cannot pay you back??? Just a little confuse on what this would mean. A collapse in the stock market I can follow, bonds seem to be a different story. Just wondering where the REAL SAFE HAVEN is for my money.

Savings Bonds never decline in value, no matter what interest rates do, which make them superior to traditional bonds in the scenario Schiff fears.

From a quick look at his book, it appears Schiff recommends Asian stocks, gold, and staying liquid. Savings Bonds that are over a year old are as liquid as you can get. It just occurred to me that by buying Series I Savings Bonds at the end of April one would secure 5. This amounts to 2. Comparing with the current 0. CD rates have fallen quite a bit in the last few months, making this a very interesting strategy.

You can check up on the latest national average CD rates here on Savings Bond Advisor. We have a table and a 1- and 5-year graphs information provided by Bankrate. We are taxed jointly as a married couple … Thank you so much ,, James. James — yes, a transfer would make the interest earned so far taxable to you. My book calls this the double-taxation trap. So if one buys I bonds late in April and sells in April does the interest penalty come off the last 3 months of ownership? Possible drawback with buying I bonds April 09 is a reduction in purchasing power for May 09 I bonds with an expected higher base rate to compensate for lack of inflation component.

Is anyone at the Treasury Dept. My local banker told me just the other day that he has a client who is purchasing 5K per month and so far no rejection from the Treasury or money returned. What are the chances that the May rate would be less than the rate available today? The downside is that if the Treasury starts policing it in the future it can just give you your money back without interest.

Elaine MC — The chances of an increase in the I bond fixed rate right now are about The April I bond will return more over 1 year than most bank CDs. The safest thing to do is to buy some now and stimulus stock market in May.

I have two child ages 3 and 7. When they start college can I use my own E or EE Saving Bonds to pay for their school and still receive the tax break OR would it have to be their own savings bonds that pays for college and gets the tax break.

Also, is it worth it for me to still purchase saving bonds in my own name even though I am 37 years old. In the long run which is better at the end for the three of us. Jerry — Historically, I bonds have outperformed Forex tutorial pdf in hindi bonds. Typically ava forex review your age buy bonds in their own names.

The college education tax break, should you be otherwise eligible, requires that the bonds be in the name of a parent.

What penalty on an i-bond redeemed before 5 years now that the bond has a zero yield? Is it the previous three months or the next three months? Robert — The penalty is the most recent three months of interest. Example — if you redeem in July, you lose April-May-June. I assume you forex egypt trading just forgotten, so this is a reminder.

I notice that you have been recently recommending putting our monthly investments into the stock market as opposed to Savings Bonds. Speaking for myself, I would hesitate getting my feet wet into the stock market at least for the forseeable future. Even experienced traders have been badly bruised during the last year and explains why many have flocked to government securities and hence the light trading volume. By the way, are U.

We know where Wall Servizio sul forex iene stands.

It would be informative if you included 5 year CDs in this analysis. I think they would outperform the other two. You could use an average 5 Year CD rate published by WSJ. Com or some other source.

Send me the link if the wsj. A great source for historical data is the Federal Reserve. Unfortunately, the only have up to 6 month CD rates. You may want to look at that. I will also see if I can find 5 Yr CD rates elsewhere. A couple of observations: Whether the investment gurus want to admit it or not, I think that anyone would be crazy not to make I-bonds a part of their long term portfolio. There is an interesting article about the inadequacies of k or b plans in the October 19 issue of TIME Magazine.

I would encourgae all to read it. It basically discusses how most employed persons have only theses plans to rely on from employers and with the volitility of the market these plans are woefully inadequate to support retirees. The truth is you have to retire at the pvc forex sheet time and you cannot afford any big market downturn during retirement.

With I-bonds there would be no hassle of the market variation that has put so many people in a bind who are on the verge of retiring. There would be consistent albiet not mouth-dropping returns. The big queston is, will the Treasury ever increase the allowable amount to past limits again?

It would be nice. I tried last year, and I wasted a good part of a couple of days and a few brain cells as well. I can also how to earn money by sms you that someone or some committee in the Treasury department probably makes these decisions, but, finding out whom is an exercise in futility.

I too would like reputable company that buy timeshares see the limits restored, or at the very least increased, but the Wizard of Saving Bonds remains behind his or her curtain. Temple — there are no limits to the number or amount of Savings Bonds you can own. The limit is on how much you can invest per calendar year.

Robi — one person who figured out who to lobby was Professor Peter Tufanoalthough he was probably working with the IRS, not the Bureau of Public Debt. Www ozforex com au currency converter at least knows what Savings Bonds are see page 2 of the story. When does the first three months of hold back interest show up in the total amount of accured interest on an I bond?

Marketable Securities

I purchased I bonds in Nov. When I updated my SAVINGS BOND WIZARD in Nov. I was looking for the the hold back interest to show up after the five year holding period had expired. Pat — The limit is per Social Security Numberso if your mother purchased a bond and made you the sole the owner but used her own SSN on the purchase form, the investment would go against her SSN.

These increases were effectively when you received the penalty interest. Ronnie — The rate changes for December bonds occur in December and in June.

So your December bonds will next change in December, January in January, March in March. The Treasury has said it determines the I bond base-rate taking into account the base-rate of the 10 year TIPS. Right now, the I bond base-rate is. I would like to make the case for why the I bond base-rate should be equal, or greater, than the 10 year TIPS base-rate. Most Savings bonds investors are US citizens, most long-term Treasury security purchasers are foreign countries or government agencies.

In effect, this money becomes a gift to the Treasury. I assume this means the cost of printing and servicing paper Savings Bonds. Steven — good points. If the issue is simply the cost of the Savings Bond program, you are correct that the no-interest loan represented by uncashed Savings Bonds would cover the cost of the program.

I bet there were internal memos at the Treasury which mentioned this. After the annual limit took effect, I was hoping this would allow the Treasury to be more generous with the fixed rate.

Instead, the Treasury became more stingy. Tom any thoughts on the stock market??? I sold at 13, bought back in at 7, and 8, Thinking about cashing in my gains. Do you think it can keeping going higher?? I know your a bond man but appreciate a outside opinion.

Dave — nice work. I was also buying during the big dip, but sold what I bought long ago. The gains looked nice at the time, but your patience really paid off. All of which is another way of saying I expected the stock credit risk in fx options to reverse weeks ago.

I totally agree with your assessment about there being pressure from Wall Street to make savings bonds less attractive and less viable a long term investment be slashing limits. Unfortunately, I suspect that the fixed rate for I bonds to be poor for the next year or so. Nonetheless it is nice to see that I bonds are a good way to weather the storm.

As to I bonds, they are governed by fluctuation in the CPI. However, excessive money supply and credit can cause hyper inflation without impacting proportionally on the CPI making I bonds under perform Vis A Vis real inflation. I would appreciate your comments. Josh — There are a number of comments about whether the CPI is an accurate input file value jquery of inflation on the the inflation update page.

So the problem is that the CPI is the only game in town. Dear Tom, Is it better to pay taxes on a accrual basis than deferred basis if the amount of tax liability would be significant if you held is treasury stock a marketable security I bonds until maturity? The facts are I bonds purchased 3. I thought about practice forex trading software some bonds dated 1. So if your personal tax rate is lower now that it will be in the future, either because you have less income now or because you expect tax rates to increase, then paying the taxes annually makes sense.

However, be aware of the double taxation trap. Whether you pay the taxes annually or not, when the bonds are cashed the INT will include all the interest the bonds have ever earned. You have to remember to make adjustments on that tax return for the amount of tax that has already been paid.

Will they be able to provide your old tax returns to the IRS showing the payments if they are audited? But I would think that the total tax free status would make them an even better savings strategy for someone in that income range.

Do you have a reference for that? I have a few older savings bonds but have never redeemed one before. Your site has been a wealth of information both to me and some relatives I have passed it onto that were very thankful also. Thanks for the excellent site about savings bonds! Hi Tom, After reading your book a couple years ago a situation in which I thought it would be advantageous to pay taxes on savings bonds as you go, would be with my kids.

My kids have gotten some bonds in their names as birthday gifts etc. But, realistically, I have yet to do it I suppose because of the recordkeeping and relatively small amounts.

I have 3 online I Bonds. Would I be better off to cash in this bond and buy a new one at the current rate? I also have many paper I Bonds purchased between Dec and March Read the comments as well as the main article. I have seen no way to contact the owner of this website i. I just fixed it. Thanks for the tip about the FDIC insurance error.

I would have missed that. My oldest I Bond is earning 6. I Bonds purchased in May are now earning 6. I was told that the way interest is calculated, or some other type of calculation was changed during the last administration.

Could you explain what types of calculations were changed during the last administration to the U S Savings Bond? Patrick — There have been no changes to the way I bond interest is calculated since they were introduced. EE bond changes are detailed here.

So basically your not earning anything extra since the variable rate is supposed to offset inflation. Mike — when it comes time to redeem, you want to redeem with ones with the lowest fixed rate first, not the newest ones.

After six years, over posts, 3, real comments, and over 90, spam comments thank you, Akismetfor making managing a blog with comments possibleI am closing public comments on Savings-Bond-Advisor.

I will contine to update the main articles on this site, but not the comments. Virtually every question about Savings Bonds has been asked and answered on this site multiple times. Use the search feature see the box in the gray area near the top of this page or the detailed menu on the lower part of the home page to find the information you're looking for.

If you have a copy of Savings Bond Advisoryou can ask me a question here. Series I Savings Bonds vs the stock market Wednesday, May 1st, Categorized as: Rate this post 1 to 5 stars: See top CD Rates Below:.

On June 2nd, Charles said: On June 3rd, Mario said: On June 4th, Tom Adams said: On September 2nd, Mike said: On September 14th, Tom Adams said: On November 6th, Steve the K said: On March 2nd, Ken said: On March 25th, Robert said: On April 10th, Jud said: So, how is I-Bond better again? On April 10th, Tom Adams said: On September 6th, Mike McCune said: On September 6th, Tom Adams said: On September 6th, Wayne Adam said: On December 11th, marisol said: On January 26th, Mike McCune said: On January 28th, Tom Adams said: On January 28th, Mike McCune said: On January 29th, Tom Adams said: On March 15th, jim shehorn said: On March 18th, Tom Adams said: On April 6th, greg said: On April 7th, Tom Adams said: Greg — True, but no I bonds are declining in value, either.

On April 7th, Jeff said: Do you think the fixed rate will go higher or lower on I bonds after the MAY 1st ajustment?? On April 8th, Tom Adams said: Jeff — unless the level of TIPS interest rates unexpectedly skyrockets between now and May 1, the I bond fixed rate will be lower after May 1 Tom Adams. On April 21st, Robert Stavnem said: Who makes the decision to lower the amount of money one can make to I-Bonds.

On April 21st, Tom Adams said: On July 2nd, Ken said: It might not be long before the index fund is below the black line again. On September 6th, Mike said: On September 27th, Indra said: Is this chart updated regularly during a fixed week of the month?

On September 29th, Tom Adams said: On September 30th, jeff said: On October 1st, Tom Adams said: On October 7th, Nik said: On October 7th, Ken said: On October 8th, Tom Adams said: On October 8th, RICHARD HETRICK said: On October 21st, dave said: On October 22nd, Tom Adams said: On October 22nd, dave said: On October 23rd, Tom Adams said: On November 6th, Rick said: On November 7th, Tom Adams said: On November 7th, Rick said: On November 8th, Tom Adams said: On December 21st, Gordon said: On December 24th, Tom Adams said: On January 7th, RICHARD said: On January 8th, Tom Adams said: On February 3rd, Opher S.

On February 4th, Tom Adams said: On February 19th, bob warner said: On February 20th, Tom Adams said: On February 27th, Robert Nadler said: On February 27th, Tom Adams said: On March 22nd, Ramon said: On March 23rd, Tom Adams said: On March 23rd, dave said: On March 24th, Tom Adams said: On March 25th, Miles Behrend said: I scaned your web site for a place to subscribe to your free email alerts but cannot find it. On March 30th, Tom Adams said: Miles — the email alerts have been discontinued.

On April 7th, Steve said: Am I missing something? On April 7th, James said: Hi Tom I have a Treasury Direct account and also my wife has one. I believe I can transfer some of my bonds to her account online at the site. On April 8th, greg said: On April 9th, Tom Adams said: On April 9th, Joseph said: Tom, Is anyone at the Treasury Dept.

On April 10th, elainemc said: On April 24th, Jerry said: Hi, I have two child ages 3 and 7. Thank you for taking the time to answer my questions. On April 27th, Tom Adams said: On May 6th, William Thomason said: Well, it was a good ride while it lasted.

On May 14th, Robert Cell said: On May 15th, Tom Adams said: On August 10th, Mike B. On August 11th, Tom Adams said: On September 3rd, Rick said: On September 4th, Tom Adams said: On September 7th, Marty said: On September 7th, Tom Adams said: Marty — I checked out the WSJ. On September 9th, Marty said: On October 25th, Robert said: On October 26th, Tom Adams said: On November 3rd, Temple said: Tom, What is the limit on the amount of paper US Savings Bond one can hold?

Is this limit the face amount or the face amount plus interest? On November 3rd, Robi Zocher said: Does anyone know who we can lobby on this issue? On November 4th, Tom Adams said: On November 5th, Pat said: On November 6th, Joseph said: Tom, When does the first three months of hold back interest show up in the total amount of accured interest on an I bond?

On November 6th, Tom Adams said: On November 8th, Robi Zocher said: On November 9th, Tom Adams said: Robi — this is a terrific find. Thanks a billion for the link. On November 13th, ronnie skinner said: On November 16th, Tom Adams said: On November 16th, ronnie skinner said: On November 17th, Tom Adams said: On November 22nd, Steven said: On November 23rd, Tom Adams said: On November 26th, Ken said: On December 8th, Dave said: On December 9th, Tom Adams said: On December 24th, Robert said: Tom, I totally agree with your assessment about there being pressure from Wall Street to make savings bonds less attractive and less viable a long term investment be slashing limits.

On January 6th, Mike B. On January 6th, Tom Adams said: Mike — Thanks for the reminder. On January 8th, josh said: On January 11th, David Moran said: On January 12th, Tom Adams said: On February 4th, Pete said: On February 5th, Tom Adams said: On February 5th, Pete said: It turns out that there is a tax free status, but it applies only to higher educational costs. On February 6th, Mike McCune said: On February 8th, Tom Adams said: Mike — Yes, record keeping is the hard part of that strategy.

On February 16th, Pete said: On February 17th, Tom Adams said: Do not trade in old I bonds for new ones!

Accounting for Debt and Equity Securities

On March 23rd, Ken said: Ken — blush you are correct. On April 2nd, Steven said: It also mentions that updates are available at this website. On April 2nd, Tom Adams said: On April 2nd, Robi Zocher said: On April 6th, Nik said: On April 13th, Jann said: On April 28th, Patrick H said: On April 28th, Tom Adams said: On April 30th, Mike M said: On May 3rd, Tom Adams said: Savings Bond Questions Get an answer to your questions from the Treasury's Savings Bonds team. Click below to ask a question.

TreasuryDirect Invest online in Savings Bonds or marketable Treasury securities. Deal directly with the U. More info Enroll Log in.