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Author: ImCalvin Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75379  
Subject: Re: Advise for RothIRA & 401k, please Date: 9/29/2003 12:16 PM
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I intended to buy more this fall, but after reading some articles about bonds, I resisted. To tell you the truth, I still don't understand how bonds work. I'm confused when I read "When interest rates go up, the value of bonds goes down" and vice versa. I should read more about Bonds (including iBonds) and how they act in the market.

You might be better off disassociating regular issue bonds with gov't issued bonds. Generally gov't issue bonds are considered significantly less risky and don't fall or soar with the often talked about bond market. I Bonds in particular are tied to inflation currently at 3.56% (an index adjusted twice yearly) and have a base fixed rate currently 1.1% yeilding a total return of 4.66% annually.

For more info on I Bonds you should go directly to the source (http://www.publicdebt.treas.gov/sav/sbiinvst.htm). For info on bonds in general you might look at the Bond board at TMF (http://fireboards.fool.com/Messages.asp?bid=100135) or even at (http://www.morningstar.com/centers/bonds.html).

But yes, I do find it tempting because I could use iBonds for (future) kids' education. If I understood correctly, I'd be able to cash them out tax-free if the money (including interest) is used to fund kids' education, right?

There are some special advantages with gov't issued bonds when they are used for education purposes. You might look here for more information: (http://www.publicdebt.treas.gov/sav/saveduca.htm). However, depending on the timeframe you have with your kids going to school you might also want to look at 529 accounts or the other wide array of tax reduced educational savings accounts.

Best of luck.

-Ben
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