I-Bonds

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stocknoob4111
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I-Bonds

Post by stocknoob4111 »

I have about $70K of a $1.15M portfolio in VBILX which is Intermediate Term Bond Index. The rate is lousy of course at 1.8% or so.

Question - should I start shifting $10K at a time annually into I-Bonds? The reasoning is that why should I be holding an asset at 1.8% when I can get a risk free investment at 7+%? Even if inflation drops it's unlikely to go all the way down to 1.8% and if it does anyways I can just liquidate and shift into something else.

So what is the catch here? Also, would you buy TIPS or not vs I-Bonds?

With a 7 handle on inflation I am rethinking Bonds if there are other risk free alternatives that will keep up with inflation. Even if inflation drops to all time lows it's still higher than what bonds are returning and as I said earlier if rates rise you can always cash out of I-Bonds and shift back and since there is a 1 year lock in it isn't bad as I seriously doubt inflation is coming down to 1.8% within 1 year.

Oh, in addition, I also protect myself from a severe decline in my Bond position due to interest rate risk which is now very real... since I-Bonds don't decline it seems much more attractive... i'm just trying to see what I am missing.
Jack FFR1846
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Re: I-Bonds

Post by Jack FFR1846 »

I can think of no reason.

But I have over $400k in iBonds, so perhaps my opinion is skewed.
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02nz
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Re: I-Bonds

Post by 02nz »

The possible reasons I can think of would be:
1) the one-year lockup period;
2) loss of 3 mos' interest if redeemed before 5 years; and
3) needing to manage one additional website/logon, and a rather clunky one at that.

Still, I'd definitely prefer $10K in I-bonds over $10K in any bond fund right now. Just put in my $10K for '22.
z3r0c00l
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Re: I-Bonds

Post by z3r0c00l »

It took many years, but I have done just this. Since the Great Recession I no longer have the need/desire to compete with the government in the bond market. I want bonds for low volatility, I bonds offer zero, and predictable (if low) returns. A guarantee of inflation, no more, no less, is all I need from bonds. The rest can go in stocks.
75% Global Stocks / 25% I-Bonds
ClassOf2021
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Re: I-Bonds

Post by ClassOf2021 »

I started investing in i bonds in 2021 and think there is a strong case for them now. Main drawback for me is the limit in investment size, which makes i bonds not very material for my portfolio (they are less than a percent of total portfolio).

I also increased my investment in a stable-value-like fund in my 401k over the last year which pays 3% with a fixed value of $1/share. The limit on this investment is the size of my 401k, and it is about 25% of my overall portfolio. If you have a fund like this in a 401k, it could be useful now.

I also recently shifted 300k from total bond to tips, but I would prioritize ibonds over tips.
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Alto Astral
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Re: I-Bonds

Post by Alto Astral »

Do it. I can't get money fast enough into it. We do 20k each year. I even opened 2 trusts in our names to contribute another 20k/y
RedDog
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Re: I-Bonds

Post by RedDog »

It’s probably not a significant reason, but you might loose some negative correlation during a market crash.

That said, DW and I hold $100k of I bonds. I have to say I feel like a bit of a financial genius for the time being. :sharebeer
1moreyr
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Re: I-Bonds

Post by 1moreyr »

I have not been on the treasury direct site in almost a year. I logged in, checked my balance and transferred 10K for 2022. logged out, went to my wife's account and repeated....... It took all of 3 minutes.... People say it's clunky... but it ain't that clunky

I put more effort in a back door Roth for $7K/year. vs the effort I put in for $20K in Ibonds

Do it, do it now.....
RedDog
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Re: I-Bonds

Post by RedDog »

1moreyr wrote: Wed Jan 12, 2022 8:48 pm I have not been on the treasury direct site in almost a year. I logged in, checked my balance and transferred 10K for 2022. logged out, went to my wife's account and repeated....... It took all of 3 minutes.... People say it's clunky... but it ain't that clunky

I put more effort in a back door Roth for $7K/year. vs the effort I put in for $20K in Ibonds

Do it, do it now.....
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Gill
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Re: I-Bonds

Post by Gill »

I’m afraid with all this interest we’re going to kill the golden goose. For a time the purchase limit was reduced to $5,000 and that could happen again. Too much interest killed the credit card option.
Gill
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Xrayman69
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Re: I-Bonds

Post by Xrayman69 »

If you lose 3 months of interest if early withdrawal, does that mean interest doesn’t post for 3 months?? When does interest post if bond purchased January 2022?
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stocknoob4111
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Re: I-Bonds

Post by stocknoob4111 »

just to confirm.. under no circumstances can the original principal be lost with I Bonds correct? with a Bond index fund you could lose due to term risk so just checking that no such thing exists?
dbr
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Re: I-Bonds

Post by dbr »

stocknoob4111 wrote: Wed Jan 12, 2022 9:10 pm just to confirm.. under no circumstances can the original principal be lost with I Bonds correct? with a Bond index fund you could lose due to term risk so just checking that no such thing exists?
I guess it is possible to say that at 0% real after you pay taxes on the interest, which is just inflation, that you will have less left over in real dollars than you put in. I have always thought that while this is true it is a bit unfair. You also have to think about the taxation of anything else.

It has already been mentioned that it is possible to lose 3 months interest, which also would leave you with a tad less than the real value put in.

But there is no credit risk and no term risk to the principal.
HonoluluGator
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Re: I-Bonds

Post by HonoluluGator »

So confused… buy now or wait to see new rates in April (or October)? Or does it make much difference?
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Mel Lindauer
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Re: I-Bonds

Post by Mel Lindauer »

stocknoob4111 wrote: Wed Jan 12, 2022 9:10 pm just to confirm.. under no circumstances can the original principal be lost with I Bonds correct? with a Bond index fund you could lose due to term risk so just checking that no such thing exists?
That's true both in nominal dollars, and in pre-tax real dollars.
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smectym
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Re: I-Bonds

Post by smectym »

Jack FFR1846 wrote: Wed Jan 12, 2022 7:29 pm I can think of no reason.

But I have over $400k in iBonds, so perhaps my opinion is skewed.
My portfolio is similar. For whatever reason, went on an I bonds buying campaign back before they dropped the purchase limit. I was happy with them even before the recent rate spike. Having a solid core of such investments makes managing the risk part of the portfolio a bit less stressful.
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Re: I-Bonds

Post by Thesaints »

stocknoob4111 wrote: Wed Jan 12, 2022 7:22 pm So what is the catch here?
The catch is that they are going to pay 7% (on an annualized basis) only for 6 months. After that, who knows.
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Re: I-Bonds

Post by TropikThunder »

dbr wrote: Wed Jan 12, 2022 9:25 pm
stocknoob4111 wrote: Wed Jan 12, 2022 9:10 pm just to confirm.. under no circumstances can the original principal be lost with I Bonds correct? with a Bond index fund you could lose due to term risk so just checking that no such thing exists?
I guess it is possible to say that at 0% real after you pay taxes on the interest, which is just inflation, that you will have less left over in real dollars than you put in. I have always thought that while this is true it is a bit unfair. You also have to think about the taxation of anything else.

It has already been mentioned that it is possible to lose 3 months interest, which also would leave you with a tad less than the real value put in.

But there is no credit risk and no term risk to the principal.
Yeah worse case scenario is I Bonds lose less than any other fixed income option you could have selected.
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Re: I-Bonds

Post by TropikThunder »

HonoluluGator wrote: Wed Jan 12, 2022 9:44 pm So confused… buy now or wait to see new rates in April (or October)? Or does it make much difference?
You always get the interest posted at the time of purchase for 6 months, no matter where you are in that 6-minth rate cycle. So if you buy now (Jan) you will get the current 7.12% annualized for Jan, Feb, Mar, Apr, May, and Jun. The rate will then reset in Apr but the bonds you bought in Jan won't change to the new rate until Jul. You will then get the new rate for Jul, Aug, Sep, Oct, Nov, and Dec. Rinse and repeat.
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Re: I-Bonds

Post by smectym »

Thesaints wrote: Wed Jan 12, 2022 9:49 pm
stocknoob4111 wrote: Wed Jan 12, 2022 7:22 pm So what is the catch here?
The catch is that they are going to pay 7% (on an annualized basis) only for 6 months. After that, who knows.
“who knows” is correct in that we don’t absolutely “know,” but it’s a safe bet the next combined fixed and variable six-month rate won’t be zero. The first month CPI is already in the books and it was an eye popper. I would expect I-bond rates significantly above what we’ve been used to prior to this recent surge, until the Fed tightening campaign works as intended. And when will that be? Well: who knows
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stocknoob4111
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Re: I-Bonds

Post by stocknoob4111 »

Thesaints wrote: Wed Jan 12, 2022 9:49 pm The catch is that they are going to pay 7% (on an annualized basis) only for 6 months. After that, who knows.
yes but my current Bond Fund is paying 1.8%.. my thinking is that it will not drop too much in the next year, after that even if you cash out and lose 3 mos. the math says it will be way ahead of continuing to receive 1.8%

but there is more.. if rates do up I have 6 year term risk on my Bond Fund... I've already lost 5-6% of my capital since the peak.. since 2018 the return has been zero on the Bond Fund.

unfortunately $10k is a rather small amount but better something than nothing...

Is the record electronic or do they send you some paper ceetificate that you have to safeguard like cash?
dbr
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Re: I-Bonds

Post by dbr »

stocknoob4111 wrote: Wed Jan 12, 2022 7:22 pm I have about $70K of a $1.15M portfolio in VBILX which is Intermediate Term Bond Index. The rate is lousy of course at 1.8% or so.
What you do with 6% of your portfolio doesn't have enough effect on your ability to meet your objectives to think about it.

That said shifting some investment into I bonds is perfectly reasonable if you don't mind acquiring another and somewhat odd account to do it.
renegade06
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Re: I-Bonds

Post by renegade06 »

Alto Astral wrote: Wed Jan 12, 2022 8:41 pm Do it. I can't get money fast enough into it. We do 20k each year. I even opened 2 trusts in our names to contribute another 20k/y
So you can put an additional $10k into I bonds in a trust? Very interesting.. I’ll have to look into that.
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stocknoob4111
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Re: I-Bonds

Post by stocknoob4111 »

I read these I Bonds can be difficult to sell, one has to first transfer to a broker and sell it that way, what are the fees involved and how liquid is this market?
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Re: I-Bonds

Post by ivgrivchuck »

renegade06 wrote: Wed Jan 12, 2022 10:17 pm
Alto Astral wrote: Wed Jan 12, 2022 8:41 pm Do it. I can't get money fast enough into it. We do 20k each year. I even opened 2 trusts in our names to contribute another 20k/y
So you can put an additional $10k into I bonds in a trust? Very interesting.. I’ll have to look into that.
Yes, some forum members (including me) have done it. Both me and my wife have a living trust just for this purpose...
40% VTI | 40% VXUS | 13% I-bonds | 7% EE-bonds
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Re: I-Bonds

Post by ivgrivchuck »

stocknoob4111 wrote: Wed Jan 12, 2022 10:34 pm I read these I Bonds can be difficult to sell, one has to first transfer to a broker and sell it that way, what are the fees involved and how liquid is this market?
Incorrect. You can easily cash them out at the Treasury Direct.
40% VTI | 40% VXUS | 13% I-bonds | 7% EE-bonds
dbr
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Re: I-Bonds

Post by dbr »

ivgrivchuck wrote: Wed Jan 12, 2022 10:37 pm
stocknoob4111 wrote: Wed Jan 12, 2022 10:34 pm I read these I Bonds can be difficult to sell, one has to first transfer to a broker and sell it that way, what are the fees involved and how liquid is this market?
Incorrect. You can easily cash them out at the Treasury Direct.
Right. One is confusing TIPS and other Treasury bonds with I bonds.
exodusNH
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Re: I-Bonds

Post by exodusNH »

stocknoob4111 wrote: Wed Jan 12, 2022 10:34 pm I read these I Bonds can be difficult to sell, one has to first transfer to a broker and sell it that way, what are the fees involved and how liquid is this market?
It is not possible to sell these on the open market. You can't even use them as collateral as loans.

The sit, earning interest, until you or whoever inherits then cashes them in directly with the US Treasury. At 30 years, they stop earning interest.
RubyTuesday
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Re: I-Bonds

Post by RubyTuesday »

stocknoob4111 wrote: Wed Jan 12, 2022 10:34 pm I read these I Bonds can be difficult to sell, one has to first transfer to a broker and sell it that way, what are the fees involved and how liquid is this market?
You misread.

I bonds are non-marketable securities. Can only be redeemed by Treasury (electronic and paper) or through banks (paper).

Perhaps you read about TIPS bought at treasury?
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poker27
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Re: I-Bonds

Post by poker27 »

Very recently IBonds we’re paying 1.x%. What are the new IBonds gurus going to do when that comes back around?
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Re: I-Bonds

Post by BrokerageZelda »

poker27 wrote: Wed Jan 12, 2022 11:59 pm Very recently IBonds we’re paying 1.x%. What are the new IBonds gurus going to do when that comes back around?
For those of us using them for long term protection against inflation, probably keep buying and holding because you never know when inflation will strike again.

For those of us using them for shorter term savings or emergency funds, we can always cash out and switch anytime after 1 year if a more attractive rate shows up at an online bank or money market fund.
MNSooner
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Re: I-Bonds

Post by MNSooner »

stocknoob4111 wrote: Wed Jan 12, 2022 10:09 pm
Thesaints wrote: Wed Jan 12, 2022 9:49 pm

Is the record electronic or do they send you some paper ceetificate that you have to safeguard like cash?
Back in the olden days they used to be paper. You would order them through banks and they would be sent in the mail.

These days it is all done electronically through treasury direct. You can view your account holdings online, but there is no paper bond that you can hold in your hand…..EXCEPT……

If you request that your tax refund check be deposited by the IRS into an I-bond (5k max I believe, in addition to -not as part of- to the 10k/year limit), that I bond will be sent to you in paper form.
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Re: I-Bonds

Post by Jack FFR1846 »

Indeed, you can receive $5k in paper bonds as your federal tax refund and I have been doing that for many of the last years since TD killed a lot of their own market by taking paper bonds off of their easy purchase methods. I used to buy them with a simple form at Digital Credit Union or other banks and then for a few years when TD accepted credit cards for no fee, I'd do $30k per family member. As far as ease of sale....it's easier than selling VTI and receiving cash. I go to DCU with my paper bonds (I ONLY have paper), sign and before I leave the counter, the cash is in my account, available with no hold. I've done this with a $25 bond and I've done this with a stack of $50k in bonds. I won't do electronic bonds with the reported problems with the site and with my mom and myself spending 8 hours on the phone with TD to cash 2 $50 bonds from my dad when he passed.
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HueyLD
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Re: I-Bonds

Post by HueyLD »

MNSooner wrote: Thu Jan 13, 2022 5:13 am If you request that your tax refund check be deposited by the IRS into an I-bond (5k max I believe, in addition to -not as part of- to the 10k/year limit), that I bond will be sent to you in paper form.
You can have a portion of your refund direct deposited into your TD account if that’s what you want. Here is Form 8888 and just fill out Part I by entering TD’s routing number and account number. However, doing so will count against your annual purchase limit. In other words, you won’t get an additional $5k purchase.

https://www.irs.gov/pub/irs-pdf/f8888.pdf

https://www.treasurydirect.gov/indiv/re ... d_1208.htm

“ You can request a deposit of your refund (or part of it) to a TreasuryDirect® online account to buy U.S. Treasury marketable securities and savings bonds. For more information, go to http://go.usa.gov/3KvcP.”

“ Do you know you can have your tax refund directed to your TreasuryDirect account to use for Treasury security purchases?

TreasuryDirect offers flexible options for all your security purchases. One option to fund your account is to use your tax refund.

You can request the IRS or your state tax department to deposit your tax return directly into your TreasuryDirect account where you can use the funds to purchase savings bonds or marketable Treasury securities. All you need to do is provide TreasuryDirect's routing number and your TreasuryDirect account number in the refund instructions on your tax return.

On your tax return, enter:

the TreasuryDirect routing number, 051736158, in the “Routing number” field.
your TreasuryDirect account number in the “Account number” field.
“Savings” as the account type.
Providing these instructions in the “refund” area on your tax return will direct your refund to the Zero-Percent C of I in your TreasuryDirect account where it will be available to fund the purchase of one or more Treasury securities.

You can also use your refund to purchase Series I savings bonds in paper form.”
AlwaysLearningMore
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Re: I-Bonds

Post by AlwaysLearningMore »

poker27 wrote: Wed Jan 12, 2022 11:59 pm ....new IBonds gurus....
That's oxymoronic.

Those who hold I Bonds can rest assured their principle won't drop (not true of those holding shares in bond funds).

If better opportunities for fixed income arise in the future, then ad meliora.
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stocknoob4111
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Re: I-Bonds

Post by stocknoob4111 »

poker27 wrote: Wed Jan 12, 2022 11:59 pm Very recently IBonds we’re paying 1.x%. What are the new IBonds gurus going to do when that comes back around?
do you have a link to the historical payouts over the years? I tried looking it up but can only find a history of the fixed rate part of it not the total yield.

I am thinking that a drop of this magnitude is at least a year or more out from here, and if it does past a year you can always just cash and move to something else, sure you will lose 3 months of interest but even so you will be ahead per my calculations.
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HueyLD
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Re: I-Bonds

Post by HueyLD »

stocknoob4111 wrote: Thu Jan 13, 2022 11:26 am
poker27 wrote: Wed Jan 12, 2022 11:59 pm Very recently IBonds we’re paying 1.x%. What are the new IBonds gurus going to do when that comes back around?
do you have a link to the historical payouts over the years? I tried looking it up but can only find a history of the fixed rate part of it not the total yield.

I am thinking that a drop of this magnitude is at least a year or more out from here, and if it does past a year you can always just cash and move to something else, sure you will lose 3 months of interest but even so you will be ahead per my calculations.
Look for composite rates near the bottom.

https://www.treasurydirect.gov/indiv/re ... dterms.htm
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Re: I-Bonds

Post by BrokerageZelda »

stocknoob4111 wrote: Thu Jan 13, 2022 11:26 am
poker27 wrote: Wed Jan 12, 2022 11:59 pm Very recently IBonds we’re paying 1.x%. What are the new IBonds gurus going to do when that comes back around?
do you have a link to the historical payouts over the years? I tried looking it up but can only find a history of the fixed rate part of it not the total yield.

I am thinking that a drop of this magnitude is at least a year or more out from here, and if it does past a year you can always just cash and move to something else, sure you will lose 3 months of interest but even so you will be ahead per my calculations.
Tables of fixed and inflation rates are available on the official site:
https://www.treasurydirect.gov/indiv/re ... dterms.htm
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Re: I-Bonds

Post by ivgrivchuck »

poker27 wrote: Wed Jan 12, 2022 11:59 pm Very recently IBonds we’re paying 1.x%. What are the new IBonds gurus going to do when that comes back around?
If the time comes where VGIT clearly beats I-bonds (required margin around: 0.5%-0.8%), then I'm going to sell the i-bonds and either buy VGIT or some mid-term TIPS fund.
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dbr
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Re: I-Bonds

Post by dbr »

Buying a little bit in I bonds with a plan to sell when inflation is less and the asset does not seem to be a windfall just puts a person back in the box of some big return turning up and not having a stash of I bonds to take advantage of it. People don't have a lot in I bonds before now because there was only a short time way back when the fixed rate was not near zero and inflation has been low enough for long enough that there was nothing attractive.

I bonds are the cash of real return assets and like cash anywhere are effectively a drag on returns. It is only occasionally when a disconnect in rates and returns materializes.

I do agree all the handwriting on the wall is that bonds in general are not offering much return for awhile into the future. This will cause constant puzzlement about fixed income investing.
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Re: I-Bonds

Post by Whakamole »

poker27 wrote: Wed Jan 12, 2022 11:59 pm Very recently IBonds we’re paying 1.x%. What are the new IBonds gurus going to do when that comes back around?
I'm an old guru, but - hold onto them. They're a combination bond allocation and tax-deferred emergency fund. The times when interest rates have been low, interest rates in online banks has been lower (excepting gimmicks like high interest rates on a few thousand dollars.)

I also prefer low inflation to high inflation, even holding I-bonds, since that will save me money on tax when these are eventually cashed in.
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Re: I-Bonds

Post by JSPECO9 »

poker27 wrote: Wed Jan 12, 2022 11:59 pm Very recently IBonds we’re paying 1.x%. What are the new IBonds gurus going to do when that comes back around?
Sell the iBonds and buy bond funds with better rates.

Today, if you buy iBonds, and immediately cash them out after the 1 year period, even net of 3-month penalty and taxes your net yield will still be way higher than Total Bond.
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Re: I-Bonds

Post by tibbitts »

MNSooner wrote: Thu Jan 13, 2022 5:13 am If you request that your tax refund check be deposited by the IRS into an I-bond (5k max I believe, in addition to -not as part of- to the 10k/year limit), that I bond will be sent to you in paper form.
And if you're lucky, all those little envelopes (not actually "an I-bond", as in a single one) might actually find their way to your mailbox.
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Re: I-Bonds

Post by friar1610 »

Something I’ve never understood….when it comes to stocks everyone talks about diversification. An index with 5000 stocks is better than 500. Holding international at some level is better than domestic only. Etc., etc. But with bonds the questions are often along the lines of bond MF OR I-Bonds? Treasury OR corporate? Intermediate term OR long term? Why not think of “bonds” as “fixed income” and spread the money around a bit. A core bond mutual fund. A stack of I- or EE-bonds (or both)? Some CDs? Maybe a MYGA? They’re all fixed income yet each has characteristics that differentiate (and diversify) them from the others. At any given time one will probably be doing your overall portfolio more good than the others. Since you can’t predict the best performer for a given situation in advance, why not cover as many fixed income bases as you can? To my mind, some number of I-Bonds fit perfectly into such a world view.

Disclosures: been buying I-Bonds on and off for 20 years. Also own Total Bond fund, Short-Term Treasury fund, CDs and cash/MM fund.
Friar1610 | | I have recently concluded that when it comes to investing I am a satisficer, not an optimizer.
AlwaysLearningMore
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Re: I-Bonds

Post by AlwaysLearningMore »

friar1610 wrote: Thu Jan 13, 2022 1:27 pm Something I’ve never understood….when it comes to stocks everyone talks about diversification. An index with 5000 stocks is better than 500. Holding international at some level is better than domestic only. Etc., etc. But with bonds the questions are often along the lines of bond MF OR I-Bonds? Treasury OR corporate? Intermediate term OR long term? Why not think of “bonds” as “fixed income” and spread the money around a bit. A core bond mutual fund. A stack of I- or EE-bonds (or both)? Some CDs? Maybe a MYGA? They’re all fixed income yet each has characteristics that differentiate (and diversify) them from the others. At any given time one will probably be doing your overall portfolio more good than the others. Since you can’t predict the best performer for a given situation in advance, why not cover as many fixed income bases as you can? To my mind, some number of I-Bonds fit perfectly into such a world view.

Disclosures: been buying I-Bonds on and off for 20 years. Also own Total Bond fund, Short-Term Treasury fund, CDs and cash/MM fund.
Thank you for injecting some common sense into a discussion that often assumes fixed income choices have to be one or the other.
Retirement is best when you have a lot to live on, and a lot to live for.
colddeadfish
Posts: 83
Joined: Sun Apr 23, 2017 1:30 pm

Re: I-Bonds

Post by colddeadfish »

AlwaysLearningMore wrote: Thu Jan 13, 2022 1:34 pm
friar1610 wrote: Thu Jan 13, 2022 1:27 pm Something I’ve never understood….when it comes to stocks everyone talks about diversification. An index with 5000 stocks is better than 500. Holding international at some level is better than domestic only. Etc., etc. But with bonds the questions are often along the lines of bond MF OR I-Bonds? Treasury OR corporate? Intermediate term OR long term? Why not think of “bonds” as “fixed income” and spread the money around a bit. A core bond mutual fund. A stack of I- or EE-bonds (or both)? Some CDs? Maybe a MYGA? They’re all fixed income yet each has characteristics that differentiate (and diversify) them from the others. At any given time one will probably be doing your overall portfolio more good than the others. Since you can’t predict the best performer for a given situation in advance, why not cover as many fixed income bases as you can? To my mind, some number of I-Bonds fit perfectly into such a world view.

Disclosures: been buying I-Bonds on and off for 20 years. Also own Total Bond fund, Short-Term Treasury fund, CDs and cash/MM fund.
Thank you for injecting some common sense into a discussion that often assumes fixed income choices have to be one or the other.
Yes, thank you. I think this is especially true for low income investors. Having a stash of I-bonds really helps me sleep at night :beer
Stewpac14
Posts: 46
Joined: Mon Jan 22, 2018 3:28 pm

Re: I-Bonds

Post by Stewpac14 »

Just purchased 20K in Ibonds (10k in December 2021 and 10k in January 2022). its a good place to store some cash for me instead if sitting in a savings account. It will at least make something versus nothing. If I see a better opportunity after a year ill invest it elsewhere, if not, let it sit
ivgrivchuck
Posts: 1105
Joined: Sun Sep 27, 2020 6:20 pm

Re: I-Bonds

Post by ivgrivchuck »

friar1610 wrote: Thu Jan 13, 2022 1:27 pm Something I’ve never understood….when it comes to stocks everyone talks about diversification. An index with 5000 stocks is better than 500. Holding international at some level is better than domestic only. Etc., etc. But with bonds the questions are often along the lines of bond MF OR I-Bonds? Treasury OR corporate? Intermediate term OR long term? Why not think of “bonds” as “fixed income” and spread the money around a bit. A core bond mutual fund. A stack of I- or EE-bonds (or both)? Some CDs? Maybe a MYGA? They’re all fixed income yet each has characteristics that differentiate (and diversify) them from the others. At any given time one will probably be doing your overall portfolio more good than the others. Since you can’t predict the best performer for a given situation in advance, why not cover as many fixed income bases as you can? To my mind, some number of I-Bonds fit perfectly into such a world view.
There are very good reasons for that:
- Publicly traded stocks are fairly valued (at least most of them, most of the time), investing in them requires a long time horizon (10+ years). Market price finding works, diversification is a no-brainer.

- Many fixed income assets (I-bonds, EE-bonds, MYGAs, non-brokered CDs) cannot be traded in secondary markets. Price finding doesn't work. There are "free lunches" for retail investors. For example if I-bonds were available for institutional investors, we would immediately see hundreds of billions flowing into them.

- If you need to choose between $100k into one CD with 3% interest OR ($50k into a CD with 3% interest and $50k into a CD with 2% interest), are you really better off by splitting your money?
40% VTI | 40% VXUS | 13% I-bonds | 7% EE-bonds
Topic Author
stocknoob4111
Posts: 2305
Joined: Sun Jan 07, 2018 12:52 pm

Re: I-Bonds

Post by stocknoob4111 »

HueyLD wrote: Thu Jan 13, 2022 11:39 am Look for composite rates near the bottom.

https://www.treasurydirect.gov/indiv/re ... dterms.htm
thanks, the composite rates don't match the fixed+inflation, for instance the composite for Sep. 1998 is listed as 10.64% and for that same month fixed was 3.40% and inflation was 0.62% so composite should've been 4.02%, what am I missing?
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