Savings bonds yielding 8.36%

[NW-Bound]

For people who are not familiar with I bonds, the fixed rate is for life of the bond. I wonder if any of us bought I bonds during May 2000 - Oct 2000, when the fixed rate was 3.60%. You would be "golden".

Obviously, the Treasury had problems raising money then, so had to give away a heck of a premium, and also let you buy a whole lot more than the lower limit now. Between paper and electronic forms, and between a married couple ($30K x 4), you've got to be very rich to have that much cash to put away each year.

Now that they have cut the fixed rate to 0%, I wonder who would be buying. Too much cash sloshing around, trying to get some "meager but safe" returns. Time to get some stocks, anybody?

P.S. I saw that Bikerdude did get some in the above time frame. Good for you! I did not.

 

[friar1610]

For people who are not familiar with I bonds, the fixed rate is for life of the bond. I wonder if any of us bought I bonds during May 2000 - Oct 2000, when the fixed rate was 3.60%.

I got a bunch at 3.5% but ran up against the annual limit on how much you could buy. Then when I got to the next time I could buy, I was shorter on cash, so didn't buy up to the max. By the time I had more cash the rate had dropped below what I thought was prudent to buy.

Any way you look at it, a 3.5% real rate of return on a guaranteed, completely safe investment is a great thing for the fixed income portion of a portfolio. Because of the tax deferral, my thinking is that my I-Bonds will be the very last thing I will sell (and, if I can afford it, I'll use the proceeds to help my grandkids in college and avoid the tax altogether.)

 

[cute fuzzy bunny]

For people who are not familiar with I bonds, the fixed rate is for life of the bond. I wonder if any of us bought I bonds during May 2000 - Oct 2000, when the fixed rate was 3.60%. You would be "golden".

Obviously, the Treasury had problems raising money then, so had to give away a heck of a premium

That and nobody really quite understood or wanted to buy ibonds and tips back then. So they were...umm...'marked to market'.

Hell, the stock market was going up at 25-30% a year and had been for 5 years. Who the hell wanted to buy savings bonds? Gimme some of them there tech stocks!

So they sold at a premium until the market took a dump and people figured out what they were and why they might want to incorporate them into their portfolio. After which they paid slightly more than bupkus.

Funny how wistful people get about the potential for having bought bonds that paid 3.xx% plus an inflation calculation that may or may not apply to them, but are leery of buying a mutual fund that pays a dividend higher than that, and has total returns that have well exceeded anything that TIPS or iBonds have ever paid...

When I have a chance, I'll have to dig up a few of the threads from a few years ago when the stock market was roaring and the CPI was barely registering inflation and everyone was glad they could dump their iBonds with only a nominal penalty.

And those mutual funds I mentioned were still paying ~4% and improving their capital value by another 3-4%+...

What do you do all day indeed...

 

[NW-Bound]

...are leery of buying a mutual fund that pays a dividend higher than that, and has total returns that have well exceeded anything that TIPS or iBonds have ever paid...

Yeah, like those dividend-paying MFs that I have that were loaded with financials...

Seriously, it may be good time to buy stocks now. I won't cash out my I-bonds though. Got some MM's to go shopping with first. Slooowly, a few hundred shares at a time ...

 

[Bikerdude]

That and nobody really quite understood or wanted to buy ibonds and tips back then. So they were...umm...'marked to market'.

Hell, the stock market was going up at 25-30% a year and had been for 5 years. Who the hell wanted to buy savings bonds? Gimme some of them there tech stocks!

Exactly! The reason to have an asset allocation and to stick with it IMHO.

 

[friar1610]

Exactly! The reason to have an asset allocation and to stick with it IMHO.

A point well taken. Sticking to an AA plan hasn't given me the chance to brag a lot about gains at cocktail parties. But it's kept me comfortably retired for 5+ years.