Do I-Bonds Count (as part of your bond allocation)?
Do I-Bonds Count (as part of your bond allocation)?
When evaluating my overall asset allocation, should I include my I-Bonds as being part of the bond portion of my portfolio? One one hand, they are bonds, but on the other hand they are not traded in the market, so they don't rise when other asset classes fall.
Re: Do I-Bonds Count (as part of your bond allocation)?
Sure, they are still bonds (fixed income securities) with a principal amount payable at maturity or earlier redemption. Treat them however you like. Many people treat them as their cash reserve.
Gill
Gill
Cost basis is redundant. One has a basis in an investment |
One advises and gives advice |
One should follow the principle of investing one's principal
Re: Do I-Bonds Count (as part of your bond allocation)?
Absolutely. They are my only bond holding, BTW.
Re: Do I-Bonds Count (as part of your bond allocation)?
I count them, personally.
Re: Do I-Bonds Count (as part of your bond allocation)?
I think some people would object very strongly to the notion that "[some asset classes] rise when other asset classes fall." Usually, long-term, correlations are more like 0 at the lowest and generally not negative.rrouse wrote:When evaluating my overall asset allocation, should I include my I-Bonds as being part of the bond portion of my portfolio? One one hand, they are bonds, but on the other hand they are not traded in the market, so they don't rise when other asset classes fall.
It's just categorization, a mental exercise, anyhow. I'd say the answer depends on your views of portfolio construction and how you make contributions or withdrawals to it.
Personally I'd consider it functionally fixed income and low risk (no risk), so yes, I'd include it with bonds. For what it's worth, I don't make a strong distinction between bonds and cash either.
Re: Do I-Bonds Count (as part of your bond allocation)?
They do for me as well as CDs.
- Steelersfan
- Posts: 4125
- Joined: Thu Jun 19, 2008 8:47 pm
Re: Do I-Bonds Count (as part of your bond allocation)?
+1leonidas wrote:They do for me as well as CDs.
- nisiprius
- Advisory Board
- Posts: 52105
- Joined: Thu Jul 26, 2007 9:33 am
- Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry
Re: Do I-Bonds Count (as part of your bond allocation)?
I don't think it matters. Of the three asset classes, stocks, bonds, and cash, the big difference is between stocks and the other two. It is percent stocks and is the big determining factor in terms of how much risk you are taking. Series I savings bonds are an important part of my conservative assets. They are like bonds in some ways and like cash in others.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: Do I-Bonds Count (as part of your bond allocation)?
Some people also count them as cash either in their retirement portfolio or as an emergency fund. Fixed income works as well since they are bonds.
Laura
Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.
- stevewolfe
- Posts: 1672
- Joined: Fri Oct 10, 2008 7:07 pm
Re: Do I-Bonds Count (as part of your bond allocation)?
Same for me.leonidas wrote:They do for me as well as CDs.
- Mel Lindauer
- Moderator
- Posts: 35757
- Joined: Mon Feb 19, 2007 7:49 pm
- Location: Daytona Beach Shores, Florida
- Contact:
Re: Do I-Bonds Count (as part of your bond allocation)?
Yes, they count as bonds, and they can be short-term, intermediate-term or long-term, depending on when you plan to redeem them.
The nice thing about I Bonds is that they're risk-free and can never lose value.
The nice thing about I Bonds is that they're risk-free and can never lose value.
Best Regards - Mel |
|
Semper Fi
Re: Do I-Bonds Count (as part of your bond allocation)?
The main reason you hold bonds is to reduce the risk of your portfolio, and I-Bonds do that very well. If you have an I-Bond, you know exactly how much inflation-adjusted value you will have in the year you cash it in, and you can choose the year.
Re: Do I-Bonds Count (as part of your bond allocation)?
+2stevewolfe wrote:Same for me.leonidas wrote:They do for me as well as CDs.
All the Best, |
Joe
Re: Do I-Bonds Count (as part of your bond allocation)?
I use them as an e fund and hold a bond mutual fund for bonds. I don't consider iBonds part of my investment money really.
70% Global Stocks / 30% Bonds
Re: Do I-Bonds Count (as part of your bond allocation)?
I suppose it depends on how you define 'asset allocation.' In helping my parents, I started with the amount of money they had, then decided how much to put in equity, how much to put in non-equity, THEN I split up the non-equity based on various liquidities. Basically, I wanted them to have some emergency money available whenever they needed -- so that goes in the regular bank account and money markets. Then there's money that's a bit more locked up: ibonds. Then some actual bonds with the rest. So I chose from the beginning to take some of our fixed income and put it in ibonds, so I chose to define ibonds as fixed income per se.
Re: Do I-Bonds Count (as part of your bond allocation)?
I don't count them towards my bond allocation. I consider them as a CD or online savings account.
Last edited by surfer1 on Fri Dec 26, 2014 8:43 pm, edited 1 time in total.
- backpacker
- Posts: 1620
- Joined: Mon Sep 22, 2014 2:17 pm
Re: Do I-Bonds Count (as part of your bond allocation)?
I've been thinking about this myself. It depends on what you mean by "rise." I think that iBonds and CDs rise in value when stock fall even though they don't rise in price. The only reason they don't rise in price is that you can't sell them. You can only redeem them. If you could sell them, their value would have gone up.rrouse wrote:When evaluating my overall asset allocation, should I include my I-Bonds as being part of the bond portion of my portfolio? One one hand, they are bonds, but on the other hand they are not traded in the market, so they don't rise when other asset classes fall.
Say that you somehow managed to get a five-year $10,000 CD paying 10% a year for the next five years. How much is that CD worth? A lot more than $10,000 since there aren't other products that are generally available paying that high a rate. And this despite the fact that you can't sell the CD. The CD is worth more than $10,000 even though you can't cash it out (or sell it) for more than $10,000.
For these sorts of reasons, I would count iBonds and CDs as bonds for the purpose of asset allocation.
Re: Do I-Bonds Count (as part of your bond allocation)?
They never lose nominal value. The not so nice thing about today's iBonds (zero or near zero real growth) is that they are guaranteed to lose value if you are above the 0% tax bracketMel Lindauer wrote: The nice thing about I Bonds is that they're risk-free and can never lose value.
--vtMaps
"Truly, whoever can make you believe absurdities can make you commit atrocities" --Voltaire, as translated by Norman Lewis Torrey
- Mel Lindauer
- Moderator
- Posts: 35757
- Joined: Mon Feb 19, 2007 7:49 pm
- Location: Daytona Beach Shores, Florida
- Contact:
Re: Do I-Bonds Count (as part of your bond allocation)?
True, but since the rate is higher than most other risk-free options, they're still the best of a bad lot. They'll likely provide a higher after-tax return than just about any other risk-free option. And the interest is free from state and local taxation, so that adds to their after-tax return for most investors.vtMaps wrote:They never lose nominal value. The not so nice thing about today's iBonds (zero or near zero real growth) is that they are guaranteed to lose value if you are above the 0% tax bracketMel Lindauer wrote: The nice thing about I Bonds is that they're risk-free and can never lose value.
--vtMaps
Best Regards - Mel |
|
Semper Fi
Re: Do I-Bonds Count (as part of your bond allocation)?
+1nisiprius wrote:I don't think it matters. Of the three asset classes, stocks, bonds, and cash, the big difference is between stocks and the other two. It is percent stocks and is the big determining factor in terms of how much risk you are taking. Series I savings bonds are an important part of my conservative assets. They are like bonds in some ways and like cash in others.
They're a lot like short-term CDs to me, except they 1) are inflation adjusted and 2) expand your tax deferred space.
Re: Do I-Bonds Count (as part of your bond allocation)?
Yes. They are I-BONDS.
Leonard |
|
Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? |
|
If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.
Re: Do I-Bonds Count (as part of your bond allocation)?
I count them as part of my fixed income (cash/bonds) for the same reasons everyone else already said.
Re: Do I-Bonds Count (as part of your bond allocation)?
For what purpose are you labeling things?rrouse wrote:When evaluating my overall asset allocation, should I include my I-Bonds as being part of the bond portion of my portfolio? One one hand, they are bonds, but on the other hand they are not traded in the market, so they don't rise when other asset classes fall.
If you want to make a distinction between things that are priced in the market and things that can be redeemed at a definite face value, then I bonds are not bonds and something that isn't a bond but is priced in the market, such as a brokered CD, is a bond, if priced in the market is what you mean by bonds.
People often lump the whole mess into a category called fixed income, which is neither income nor fixed, as compared, for example, to a fixed annuity which really is fixed and income, but is not an investment.
Re: Do I-Bonds Count (as part of your bond allocation)?
All finances are fungible, but I-Bonds (to mangle Orwell) are more fungible then others- there is very little you can't reasonably use them for. Gut level, I'm not comfortable with the suggestion of Zvi Bodie that maxing out I Bonds by themselves (in combination with Social Security) makes a reasonable retirement investment for those of modest means. But if I were inclined to treat them as bonds (at the moment, they are emergency cash to me), I'd feel comfortable making them something around a quarter of my bond allocation.
"You can't latte yourself to bankruptcy. The bladder won't allow it." |
-Katherine Porter
Re: Do I-Bonds Count (as part of your bond allocation)?
I call my currently owned I bonds my "emergency fund." Now that I have moved my e-fund into I bonds over the past few years, future purchases of I bonds ($15k/year including $5k/year tax refund in paper I bonds) will be counted as part of my fixed income allocation. But really it's all one pot of money, and the names I assign subsets of dollars are fairly immaterial.
NightOwl
NightOwl
"Volatility provokes the constant dread that some investors know more than we do, making us fearful of ignoring such powerful price movements." |
Peter Bernstein, "The 60/40 Solution."