I'm not questioning the credibility of this statement, but I've been looking for a Bernstein-quality discussion of it for a long time. Do you happen to have a link or a reference to that volatility ranking?Historically bonds give a better long-term risk (i.e. volatility) adjusted rate of return as part of an AA than cash does.
I think Mel Lindauer over at Bogleheads mentions that "Golden Era" of I bonds every time the subject comes up. He'd probably buy you out at a premium!Hey Nords - I was [-]luckier than I can ever believe[/-] extremely prescient with my [-]couldn't find my a$$ with both hands[/-] skillful decision to roll a chunk of change into I-bonds in 2000/2001, with an average fixed rate of 3.3% (currently about 5% of my net worth).
Given how high the real rates are, I'm reluctant to cash them in and would love to keep them as a backup for the slim chance we have massive inflation in the next 20 years before they mature...although I was itching like mad in March/April 2009 to cash them in and go long in equities.
What kind of fixed rates did your I-bonds have? Were you trying to take advantage of your daughter's current low income tax rate, or you just saw better opportunities for the money? Any other backup plans to take advantage of higher inflation if it rears its head down the road?
As REWahoo mentioned, read about our ER portfolio in my profile because I'm already receiving a military COLA'd pension and spouse's is coming in 2022. With a high-equity portfolio and those pensions (plus a couple of cheap mortgages) we feel pretty well set for inflation.
We bought the I bonds in Jan 05/Oct 05/July 06 as education savings bonds (when our kid was 13 years old) and now we're cashing them in for the tax-free education benefit. I haven't looked up the fixed rate on TreasuryDirect but the Savings Bond Wizard is showing yields around 4-4.5%.
[-]If[/-] When higher inflation rears its ugly head we'll just wait for our pension COLAs to kick in, hold on to our equities & their dividends, roll over the CD ladder, and maybe sell a bunch of covered calls to optimistic options traders...