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Subject:  Re: STRIPs and TINTs Date:  10/2/2012  4:16 PM
Author:  trader2012 Number:  34433 of 35923


I’d suggest that a re-write of the first sentence of the second paragraph is needed. Rather than asserting without proof that “STRIPS are well suited…”, the honest statement is that “they might be suited to funding specific needs,” and that would depend on a whole host of factors, not the least of which is that buying STRIPS in today’s Zero Interest Rate Environment is more likely to cause losses and tax griefs than not. Take a look at E*Trade’s offering-list for STRIPS below. Why would anyone want to buy these things at their present prices? To get a 3% return from STRIPS, one would have to go out 40 years on the yield-curve. But even a plain checking account will offer 3% on the first $25,000 of deposits. (I’ve got one locally, and I know others are available nationally.) A lot can happen in 40 years, not the least of which will be rising interest-rates that would make buying STRIPS now the ultimate in market mis-timing.

Also, there is the problem of taxes. Treasuries (of any type) are exempt from state taxes only when they are held in taxable accounts, as you say. However, as you also point out, then the implied-interest becomes immediately taxable. But that is going to