UnThreaded | Threaded | Whole Thread (13) | Ignore Thread Prev | Next
Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35400  
Subject: Re: I-bond yields crash as expected... Date: 5/1/2002 9:05 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 2
And, to anyone who is excited about having gotten an I-bond before the rate change, don't forget in 6 months you'll be getting 2.57% for the following 6 months, unless you cash in and lose 3 months interest and pay your taxes. Glad I stuck to CDs.

At this stage of my life -- young; about to be married; no children -- the only thing I can see using savings bonds for is the less liquid portion of my emergency fund. For this role, I want a set-it-and-forget-it place to stash my money. My requirements for this investment are as follows: (1) principle is safe; (2) likely to return more than my brokerage account's MMF sweep; (3) no hassles. For me, savings bonds make a lot of sense in this role and over the next year or two, I plan to gradually move much of my emergency money to savings bonds.

Now...that said, I ran some calculations given the last 5 years of I-bond inflation rates and various fixed rates and compared these to the EE-bond rates for the same period. Granted, this is a limited sample size...but it appears that the "break-even" point where both bonds have the same average return occurs when the fixed-rate portion of I-bonds is at about 2.5% (actually slightly below 2.5% so far). At higher fixed-rates, you are better off in I-bonds; at lower fixed-rates, you are better off in EE-bonds.

Given this, I am thinking I should probably go with EE-bonds for my emergency fund "investments" over the next 6 months. Any thoughts from the bond masters?

ACME
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (13) | Ignore Thread Prev | Next

Announcements

Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Looking at Currency Ratios
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement