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Do I-Bonds belong in a portfolio?
Old 06-11-2022, 12:38 PM   #1
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Do I-Bonds belong in a portfolio?

No liquidity for one year.
Lose 3 months interest if redeemed before 5 years.
0% fixed rate when all other interest rates skyrocketing.
Interest earned just keeps pace with inflation. It may sound great, but that's only because inflation is historically high. At this rate, you put a dollar in, you'll effectively get a dollar out in 5 years.
$10k/per person/per year Purchase limits.
When inflation returns to "normal" your returns return to 2-3% APR.
The benchmark CPI-U badly underestimates the real inflation we've seen in food and energy.

These facts reduce the attractiveness of I-bonds. I bought $40k worth, but wouldn't buy more and am not on the I-bond bandwagon. If it seems awesome to you, maybe it's because you've been brainwashed into thinking 2-3% APR on bonds or 30 year CDs is great. Current monetary policy penalizes savers and encourages alternative investing.
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Old 06-11-2022, 12:55 PM   #2
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Originally Posted by Bruceski44 View Post
These facts reduce the attractiveness of I-bonds. I bought $40k worth, but wouldn't buy more and am not on the I-bond bandwagon. If it seems awesome to you, maybe it's because you've been brainwashed into thinking 2-3% APR on bonds or 30 year CDs is great. Current monetary policy penalizes savers and encourages alternative investing.
Really? I did not realize I was being brainwashed. And here I am, an educated man, thinking that the current Ibond rate, even if held for only a year and then sold still puts more dollars in my pocket that other investments of similar safety available to me at this time. How foolish of me.
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Old 06-11-2022, 01:15 PM   #3
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Originally Posted by Bruceski44 View Post
Lists all the bad things about iBonds
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I bought $40k worth
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Old 06-11-2022, 03:24 PM   #4
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Originally Posted by Bruceski44 View Post
No liquidity for one year.
Lose 3 months interest if redeemed before 5 years.
0% fixed rate when all other interest rates skyrocketing.
Interest earned just keeps pace with inflation. It may sound great, but that's only because inflation is historically high. At this rate, you put a dollar in, you'll effectively get a dollar out in 5 years.
$10k/per person/per year Purchase limits.
When inflation returns to "normal" your returns return to 2-3% APR.
The benchmark CPI-U badly underestimates the real inflation we've seen in food and energy.

These facts reduce the attractiveness of I-bonds. I bought $40k worth, but wouldn't buy more and am not on the I-bond bandwagon. If it seems awesome to you, maybe it's because you've been brainwashed into thinking 2-3% APR on bonds or 30 year CDs is great. Current monetary policy penalizes savers and encourages alternative investing.
I don't understand your issue about the purchase limits - who in the world would say to themselves "9.62% for $10k is a good deal, but since I can't get 9.62% on $20k, I'll pass?"
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Old 06-11-2022, 04:00 PM   #5
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Originally Posted by Chuckanut View Post
Really? I did not realize I was being brainwashed. And here I am, an educated man, thinking that the current Ibond rate, even if held for only a year and then sold still puts more dollars in my pocket that other investments of similar safety available to me at this time. How foolish of me.


Maybe you need to go back to the drawing board if your education has left you with the notion that staying even with inflation is good.
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Old 06-11-2022, 04:01 PM   #6
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I don't understand your issue about the purchase limits - who in the world would say to themselves "9.62% for $10k is a good deal, but since I can't get 9.62% on $20k, I'll pass?"


Good deals don't come with puny purchase limits. OTOH, they have minimums.
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Old 06-11-2022, 04:16 PM   #7
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Maybe you need to go back to the drawing board if your education has left you with the notion that staying even with inflation is good.


Except that is not what Chuck said. He said comparative income investments. I do not know of any short duration A rated bonds generating the interest rate of an IBond even with the 1 year penalty. Your complaint seems to be more directed at the income market in general and of course contribution limits to IBonds, not what he stated.
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Old 06-11-2022, 04:26 PM   #8
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Except that is not what Chuck said. He said comparative income investments. I do not know of any short duration A rated bonds generating the interest rate of an IBond even with the 1 year penalty. Your complaint seems to be more directed at the income market in general and of course contribution limits to IBonds, not what he stated.


With all due respect, I-Bonds put zero dollars in your pocket, except for what you put in. Zero real return, zero alpha.
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Old 06-11-2022, 04:38 PM   #9
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With all due respect, I-Bonds put zero dollars in your pocket, except for what you put in. Zero real return, zero alpha.

I-bonds keep up with high inflation without risk. There are much worse things that can happen than zero real return.
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Old 06-11-2022, 06:06 PM   #10
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$40 k is far less than I dedicate to good investments. It's also far less than I would keep in cash if inflation wasn't sky high.

Where are you getting a better yield anywhere than 9.62% now, well, besides Energy.
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Old 06-11-2022, 06:20 PM   #11
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I agree. Like about any other income vehicle, or any major index fund the past 12 months. It is what it is. And more importantly many people like X amount of money dedicated in safer income vehicles. Sometimes you just have to take what the pitcher gives you and hit to the opposite field for the base hit instead of trying to pull the outside pitch for a home run.


No offense, but willfully sacrificing growth in any significant portion of your portfolio is not a good strategy. Giving up 1-5 years liquidity to make zero return worsens that. Being happy to do so is like saying "Thank you sir! May I have another?" as you get paddled. Remember, if you hold for 5 years, you get to zero. Redeeming before that gets you negative real returns.

If they added a fixed-rate component and raised the purchase limit, It'd be easier for me to get behind this. Why the limit? Why have they not raised the fixed rate from 0?

You are all coming up with risky ways to buy more I-bonds. Trusts, gifts, business names. You don't see any risk that our benevolent government will disallow this? If you're already ratcheting up the risk, why don't you think outside the box and look into other ways to get inflation-beating returns? If you don't think it will happen, just ask all the people who held investment-grade thinly-traded preferreds. The gov't made them an "expert market" trade where you can't buy, the prices plummeted and only the big fish can buy them, now at a huge discount to redemption value. If you're a little fish (as most of us are) don't be satisfied with the pablum you're being fed by the same government looking to impoverish you.

Of course, growth is not an issue if you have a COLA pension. But for me, more creativity is required.
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Old 06-11-2022, 06:28 PM   #12
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Maybe you need to go back to the drawing board if your education has left you with the notion that staying even with inflation is good.

@Bruceski44,
After reading your biography, I’m surprised to see condescending remarks to other forum members.
There are a wide variety of folks on this forum. Wealth ranges from just starting out to those who have been retired for many years. Some have fat pensions and some live off their savings. Those who live off their savings tend to keep a healthy percentage in safe investments, which may include iBonds. If they’re not for you, fine, but don’t brag to others about it being too small an investment or not earning enough. People do what they can to protect some of their savings while taking some risk in other investments. If you have some wisdom, please share. But please don’t be condescending to anyone.
May God Bless you and teach you charity to others.
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Old 06-11-2022, 07:29 PM   #13
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No offense, but willfully sacrificing growth in any significant portion of your portfolio is not a good strategy. Giving up 1-5 years liquidity to make zero return worsens that. Being happy to do so is like saying "Thank you sir! May I have another?" as you get paddled. Remember, if you hold for 5 years, you get to zero. Redeeming before that gets you negative real returns.

If they added a fixed-rate component and raised the purchase limit, It'd be easier for me to get behind this. Why the limit? Why have they not raised the fixed rate from 0?

You are all coming up with risky ways to buy more I-bonds. Trusts, gifts, business names. You don't see any risk that our benevolent government will disallow this? If you're already ratcheting up the risk, why don't you think outside the box and look into other ways to get inflation-beating returns? If you don't think it will happen, just ask all the people who held investment-grade thinly-traded preferreds. The gov't made them an "expert market" trade where you can't buy, the prices plummeted and only the big fish can buy them, now at a huge discount to redemption value. If you're a little fish (as most of us are) don't be satisfied with the pablum you're being fed by the same government looking to impoverish you.

Of course, growth is not an issue if you have a COLA pension. But for me, more creativity is required.


You are saying having some money in conservative investments is not sound? I doubt most retired people are 100% in equities. So having that money in some 3% IG Bonds may sound more sophisticated but it is netting less returns and that is the bottom line. Remember for many people this money was never an IBond vs. growth stock. Its IBonds versus short duration CDs or treasuries.
I have 20k in IBonds trapped in gifts for a now minimum 6 and 18 months. Illiquidity is zero concern as I have zero need for money. And the projected YTW before being redeemable, I am comfortable with.
I have a couple expert market issues I deliberately took into the great unknown. But I plan to hold until maturity. In fact I own more in one that is now worse than an expert market issue. It is delisted and deregistered and totally private now. But again, I kept it on purpose and love the terms and credit quality for risk reward purposes. Many people wouldnt be willing to do that, and I completely understand why. But for me, liquidity doesnt really mean much.
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Old 06-12-2022, 09:46 AM   #14
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I don’t include I bonds in my “investment portfolio”. Rather, they are a portion of my “emergency fund”. I suppose that’s pretty conservative but I’m comfortable with it.
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Old 06-12-2022, 10:01 AM   #15
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I don’t include I bonds in my “investment portfolio”. Rather, they are a portion of my “emergency fund”. I suppose that’s pretty conservative but I’m comfortable with it.
Me too. In our case, we bought I-bonds with a portion of the money that was just sitting in our checking account earning a princely 0.01% interest. Not a hard decision to make.
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Old 06-12-2022, 10:08 AM   #16
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Maybe you need to go back to the drawing board if your education has left you with the notion that staying even with inflation is good.
It's still better than not keeping up with inflation.

I bonds are not great, but the lesser evil at this point compared to other financial instruments.

And nobody here advocates putting a lot in it (not that you can with the annual limit), just the short-term portion to weather this storm.
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Old 06-12-2022, 10:12 AM   #17
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Originally Posted by Bruceski44 View Post
No liquidity for one year.
Lose 3 months interest if redeemed before 5 years.
0% fixed rate when all other interest rates skyrocketing.
Interest earned just keeps pace with inflation. It may sound great, but that's only because inflation is historically high. At this rate, you put a dollar in, you'll effectively get a dollar out in 5 years.
$10k/per person/per year Purchase limits.
When inflation returns to "normal" your returns return to 2-3% APR.
The benchmark CPI-U badly underestimates the real inflation we've seen in food and energy.

These facts reduce the attractiveness of I-bonds. I bought $40k worth, but wouldn't buy more and am not on the I-bond bandwagon. If it seems awesome to you, maybe it's because you've been brainwashed into thinking 2-3% APR on bonds or 30 year CDs is great. Current monetary policy penalizes savers and encourages alternative investing.
It's very simple, so let me explain it to you.

Today an i-bond pays 9.62% annualized for the first 6 months, government guaranteed. So if I invest $10,000 on June 1, 2022 even if the rate for the second six months is 0% then on June 1, 2023 I can redeem it and receive $10,481. (the 3 month penalty would be $0 at 0%). That is a minimum 4.81% return for 1 year. One year brokered CDs are paying 2.25% and one year US Treasuries are paying 2.44%. So why would I not take the guaranteed 4.81% return for some of my short fixed income money?

Ditto for a gift for my spouse that covers off her 2023 allowance of $10k... I can buy it today at 9.62% for the first 6-months and deliver it to her on January 1, 2023 and she can redeem it for a minimum of $10,481 on June 1, 2023. Minimum return is 4.81%

Let's extend it to buying $10k as a gift for my spouse today that will be delivered on January 1, 2024 and she can redeem immediately thereafter if she choses to... minimum return is 3.01%... still better than any 19 month CD or UST available today.

And those are minimums, the actual returns are likely to be much higher.

If and when inflation returns to normal and i-bonds are crediting less that one-year CDs or UST then I'll just redeem them all and move my money elsewhere... as long as they pay more than CDs and UST I'll continue to milk the i-bond cow.
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Old 06-12-2022, 10:14 AM   #18
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With all due respect, I-Bonds put zero dollars in your pocket, except for what you put in. Zero real return, zero alpha.
Ok, and what investments do you have in your portfolio that are guaranteed to keep pace with inflation?

What do you have that have exceeded inflation YTD?
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Old 06-12-2022, 10:20 AM   #19
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With all due respect, I-Bonds put zero dollars in your pocket, except for what you put in. Zero real return, zero alpha.
and zero risk.

Zero is just a number, as is 1% or -1%. The question for investors is "What is the best number I can get with acceptable risk?" If you have alternative investments with better numbers and the same risk as the I-bonds, I'm sure many here would be interested. If you have alternative investments with better numbers and higher risks, that is not news.

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I don't understand your issue about the purchase limits - who in the world would say to themselves "9.62% for $10k is a good deal, but since I can't get 9.62% on $20k, I'll pass?"
Well, we're passing. Too much fooling around to get a yield that has no material effect on our total portfolio return. We hold TIPS instead. There are lots of small optimizations out there, like playing the credit card points and float games, that we don't bother with either. There is nothing wrong with any of them for those who choose to play. That's just not us.
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Old 06-12-2022, 10:36 AM   #20
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@Bruceski44,
After reading your biography, I’m surprised to see condescending remarks to other forum members.
There are a wide variety of folks on this forum. Wealth ranges from just starting out to those who have been retired for many years. Some have fat pensions and some live off their savings. Those who live off their savings tend to keep a healthy percentage in safe investments, which may include iBonds. If they’re not for you, fine, but don’t brag to others about it being too small an investment or not earning enough. People do what they can to protect some of their savings while taking some risk in other investments. If you have some wisdom, please share. But please don’t be condescending to anyone.
May God Bless you and teach you charity to others.
Very well said, thank you.
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