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Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
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Posts: 5,049 since Dec 2013
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Not trading related, but good investment idea.
Current rate on US Treasury iBonds is 7.12%. WSJ has done several pieces about these over last few months. Biggest downside is you can only invest $10k/year, have to hold for 1 year and if you hold for less than 5 years then you forfeit interest from the previous 3 months. Still aren't many other effectively risk-free investments out there with yields like this. If inflation stays high for the next 12-18 months these could be great earners.
The base rate on the current issue is 0%, and semi annually, the inflation rate will adjust. So, I don't quite see the real benefit here. This is literally just going to preserve the value of your dollar. Maybe the case where it really pays is if deflation were to occur, because the rate will never go below zero.
Also, unlike some treasuries like bonds, the interest on these seems to be paid out only on redemption. So, you have no interest payments coming in to reinvest.
It was obviously much better than putting it under the mattress but can you help me understand why this would be attractive @SMCJB?
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,384
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It compounds monthly so it is being reinvested.
Interest, if any, is added to the bond monthly
Really? It's not only better than putting it under the mattress but it's also better than almost any fixed income investment available. Plus you don't have the principle price risk you do in bonds. Obviously if your in debt, or have portfolio that is 100/0 this may not look attractive, but for anybody with a more traditional 60/40 style investment portfolio I would think this is attractive.
Thanks -- I missed the part about the monthly reinvestment!
Let me ask it this way, then: since this *is* an attractive product, why would one choose to buy treasuries instead of these? Purely the annual $10K investment limit?
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,384
Thanks Received: 10,206
I think the $10k limit would definitely be a limiting factor in that situation, but also the 1 year lock up.
The way I see it, even if you only keep this for the year minimum, AND lose the last 3 months interest, your still probably going to make 5% (depending on what the exact rate is April).
I think you can also do an extra $5k/year for paper bonds, which is separate from the 10k/year electronic.
And they can also be bought for kids (although I don't know if it counts towards the adult's limit).
So a family of 4 can potentially invest $60k/year in ibonds, which currently pay >9%. Now that's not a bad savings rate... although I do miss when just a decade ago regular high yield savings accounts paid 5% interest.
