Almost 20 years ago for some reason I decided to buy 8 $100 I bonds. Until recently with treasuries and one other I bond purchase that has been the extent of my bond buying.
They were purchased monthly throughout 2003 and are paying 10.77%. The oldest one issued back in 5/1/2003 has finally doubled in value to $200.28. Roughly a whopping 3.72% return. I think I’ve done much better with stocks and housing.
I think a lot of people are buying I bonds w/o having a clue what they are and that if inflation settles down the returns will drop significantly and they will be looking to sell them for the higher returns of stocks
Is there a problem with cashing out of them if they begin to be a less attractive investment?
Not at all. IIRC, you pay a 10% interest penalty if you redeem them after one year. After 5 years there is no penalty.
Sounds good to me.
BL Home Fool
Isn’t the interest penalty only on the last six month period not the entire time you have held the bond?
Answering my own question from the treasury direct website:
I, and many others, buy I-bonds as part of the fixed income portion of our investments. So it has nothing to do with the stock or real estate portion of our investments. 3.72% return in fixed income isn’t so bad over that period of time which included many years of near-zero rates.
A bit worse than I thought on the pre-five year cash in: 25% of one year’s interest.
However, if rates for I-bonds continue to out strip bank CD’s and money market rates , it still makes sense.