So...the solution is to market time and hope for the best?Thesaints wrote: ↑Tue Oct 12, 2021 4:38 pmYep. Funny thing is that the return from May 2000 (3.60% fixed rate, highest value ever) to today would be +141%, but if one had invested in the S&P500 it would have been +368%.grogu wrote: ↑Tue Oct 12, 2021 2:02 pm If I had a time machine to go back to 1999, I wouldn't be buying I-Bonds (even--or especially not--with limits of up to $120k/year). You would have done much better investing in a stock fund (even with the dot-com and 2008 crashes), which is not surprising given a 22-year time horizon.
But agreed that having a guaranteed 10% return for a 6-month period would be nice.
Stocks bought at a non particularly good moment (a rather lousy one, actually!) handily beat the return of Savings Bonds bought at the best possible moment !!
I Bonds Mega Thread (I Bond Heads Rejoice!)
Re: I Bonds variable rate @ 3.54% in May
- anon_investor
- Posts: 15122
- Joined: Mon Jun 03, 2019 1:43 pm
Re: I Bonds variable rate @ 3.54% in May
The moral of the story is S&P500 and chill... I think...tj wrote: ↑Tue Oct 12, 2021 4:54 pmSo...the solution is to market time and hope for the best?Thesaints wrote: ↑Tue Oct 12, 2021 4:38 pmYep. Funny thing is that the return from May 2000 (3.60% fixed rate, highest value ever) to today would be +141%, but if one had invested in the S&P500 it would have been +368%.grogu wrote: ↑Tue Oct 12, 2021 2:02 pm If I had a time machine to go back to 1999, I wouldn't be buying I-Bonds (even--or especially not--with limits of up to $120k/year). You would have done much better investing in a stock fund (even with the dot-com and 2008 crashes), which is not surprising given a 22-year time horizon.
But agreed that having a guaranteed 10% return for a 6-month period would be nice.
Stocks bought at a non particularly good moment (a rather lousy one, actually!) handily beat the return of Savings Bonds bought at the best possible moment !!
Re: I Bonds variable rate @ 3.54% in May
I asked this question in a separate thread but didn't get a response and I'd like to get a second opinion on the strategy. In short: I'm thinking of buying IBonds this month and funding them by redeeming EE bonds slightly ahead of schedule. Here's my situation:
I have three EE bonds each earning 4% interest that are set to fully mature at different points in the next couple of years (October 2022, December 2022, and November 2023). Since I Bonds are likely to return a little over 5% over the next 12 months (combining the current 3.54% rate with the expected ~6.5% rate to come in November), I am thinking it makes sense to redeem one of these bonds and purchase $15K of IBonds (we currently have bought $5k for the year and there are two of us) with the redemption.
We are slightly overweight in bonds/cash according to our AA, not enough to trigger a rebalancing, which is why I am considering this exchange vs. a cash purchase or rebalancing from stocks. The downside is that we would trigger taxes on the interest for any of the bonds we sell... but that would come in the next year or two anyway.
Does this make sense? If the answer is yes (as I am leaning towards), are there any factors that would make selling one EE bond better than another? For example, if we redeem the largest one (which matures first, in October of next year), we would have the highest tax bill, but it's a bill we would be paying soon anyway, and we would also keep that 4% interest (still good for bonds) on the other two for a bit longer.
I have three EE bonds each earning 4% interest that are set to fully mature at different points in the next couple of years (October 2022, December 2022, and November 2023). Since I Bonds are likely to return a little over 5% over the next 12 months (combining the current 3.54% rate with the expected ~6.5% rate to come in November), I am thinking it makes sense to redeem one of these bonds and purchase $15K of IBonds (we currently have bought $5k for the year and there are two of us) with the redemption.
We are slightly overweight in bonds/cash according to our AA, not enough to trigger a rebalancing, which is why I am considering this exchange vs. a cash purchase or rebalancing from stocks. The downside is that we would trigger taxes on the interest for any of the bonds we sell... but that would come in the next year or two anyway.
Does this make sense? If the answer is yes (as I am leaning towards), are there any factors that would make selling one EE bond better than another? For example, if we redeem the largest one (which matures first, in October of next year), we would have the highest tax bill, but it's a bill we would be paying soon anyway, and we would also keep that 4% interest (still good for bonds) on the other two for a bit longer.
- billthecat
- Posts: 1052
- Joined: Tue Jan 24, 2017 1:50 pm
- Location: USA
Re: I Bonds variable rate @ 3.54% in May
I'm buying I Bonds not as an alternative to stocks. Part of my asset allocation includes a cash allocation, and so I'm buying I Bonds as part of that. I'll gladly take 3.54% (tax deferred and state tax free) over 0.5%.anon_investor wrote: ↑Tue Oct 12, 2021 5:00 pmThe moral of the story is S&P500 and chill... I think...tj wrote: ↑Tue Oct 12, 2021 4:54 pmSo...the solution is to market time and hope for the best?Thesaints wrote: ↑Tue Oct 12, 2021 4:38 pmYep. Funny thing is that the return from May 2000 (3.60% fixed rate, highest value ever) to today would be +141%, but if one had invested in the S&P500 it would have been +368%.grogu wrote: ↑Tue Oct 12, 2021 2:02 pm If I had a time machine to go back to 1999, I wouldn't be buying I-Bonds (even--or especially not--with limits of up to $120k/year). You would have done much better investing in a stock fund (even with the dot-com and 2008 crashes), which is not surprising given a 22-year time horizon.
But agreed that having a guaranteed 10% return for a 6-month period would be nice.
Stocks bought at a non particularly good moment (a rather lousy one, actually!) handily beat the return of Savings Bonds bought at the best possible moment !!
We cannot direct the winds but we can adjust our sails • It's later than you think • Ack! Thbbft!
- anon_investor
- Posts: 15122
- Joined: Mon Jun 03, 2019 1:43 pm
Re: I Bonds variable rate @ 3.54% in May
Me too I Bonds are part of my 5-10% "fixed income" allocation.billthecat wrote: ↑Tue Oct 12, 2021 5:42 pmI'm buying I Bonds not as an alternative to stocks. Part of my asset allocation includes a cash allocation, and so I'm buying I Bonds as part of that. I'll gladly take 3.54% (tax deferred and state tax free) over 0.5%.anon_investor wrote: ↑Tue Oct 12, 2021 5:00 pmThe moral of the story is S&P500 and chill... I think...tj wrote: ↑Tue Oct 12, 2021 4:54 pmSo...the solution is to market time and hope for the best?Thesaints wrote: ↑Tue Oct 12, 2021 4:38 pmYep. Funny thing is that the return from May 2000 (3.60% fixed rate, highest value ever) to today would be +141%, but if one had invested in the S&P500 it would have been +368%.grogu wrote: ↑Tue Oct 12, 2021 2:02 pm If I had a time machine to go back to 1999, I wouldn't be buying I-Bonds (even--or especially not--with limits of up to $120k/year). You would have done much better investing in a stock fund (even with the dot-com and 2008 crashes), which is not surprising given a 22-year time horizon.
But agreed that having a guaranteed 10% return for a 6-month period would be nice.
Stocks bought at a non particularly good moment (a rather lousy one, actually!) handily beat the return of Savings Bonds bought at the best possible moment !!
-
- Posts: 1428
- Joined: Wed Oct 14, 2020 1:52 am
Re: I Bonds variable rate @ 3.54% in May
Very rarely do people bring up that bonds can outperform stocks (though it does happen viewtopic.php?t=352394 viewtopic.php?t=314053 ).billthecat wrote: ↑Tue Oct 12, 2021 5:42 pmI'm buying I Bonds not as an alternative to stocks. Part of my asset allocation includes a cash allocation, and so I'm buying I Bonds as part of that. I'll gladly take 3.54% (tax deferred and state tax free) over 0.5%.anon_investor wrote: ↑Tue Oct 12, 2021 5:00 pmThe moral of the story is S&P500 and chill... I think...tj wrote: ↑Tue Oct 12, 2021 4:54 pmSo...the solution is to market time and hope for the best?Thesaints wrote: ↑Tue Oct 12, 2021 4:38 pmYep. Funny thing is that the return from May 2000 (3.60% fixed rate, highest value ever) to today would be +141%, but if one had invested in the S&P500 it would have been +368%.grogu wrote: ↑Tue Oct 12, 2021 2:02 pm If I had a time machine to go back to 1999, I wouldn't be buying I-Bonds (even--or especially not--with limits of up to $120k/year). You would have done much better investing in a stock fund (even with the dot-com and 2008 crashes), which is not surprising given a 22-year time horizon.
But agreed that having a guaranteed 10% return for a 6-month period would be nice.
Stocks bought at a non particularly good moment (a rather lousy one, actually!) handily beat the return of Savings Bonds bought at the best possible moment !!
However agree with billthecat. Comparing stocks to bonds in this way kind of misses the point. The point of owning bonds is to reduce risk, which implies lower expected returns. Once one has decided what portion of their assets they want to allocate to bonds (less risky assets), then it comes down to which bonds one would like to hold (I Bond being one of many choices).
One can't then go back and say, "But I don't like the return on these bonds, let's take more risk". Because if one could have taken more risk, one would have done that in the first place, right? The fact that one did not want to take that risk means one necessarily must be ok with lower returns on safer assets.
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
Re: I Bonds variable rate @ 3.54% in May
I guess my point is that 22 years is a long time to hold Ibonds. If you planned on holding something for that long in 1999 or any other year (and to be fair, you may not), then I would argue that, with the possible exception of an emergency fund, you should have put that money in equities. (That's why I can't pull the trigger on EE bonds--they're essentially worthless until year 20.) But I realize such an aggressive position isn’t for everyone.
Making a bit fairer comparison, does anyone have any historical data on the past 5, 10, 20, etc. years average rate of return if, instead of investing in Ibonds you had invested in a high-yield savings account? I just did a quick search but came up empty. I know Ibonds have had a good run over the past year, but there were some years when HYS accounts were paying 3-4%.
Making a bit fairer comparison, does anyone have any historical data on the past 5, 10, 20, etc. years average rate of return if, instead of investing in Ibonds you had invested in a high-yield savings account? I just did a quick search but came up empty. I know Ibonds have had a good run over the past year, but there were some years when HYS accounts were paying 3-4%.
- whodidntante
- Posts: 13114
- Joined: Thu Jan 21, 2016 10:11 pm
- Location: outside the echo chamber
Re: I Bonds variable rate @ 3.54% in May
Can't we all just market time?
Long-term:
Those who are concerned about inflation and demand an expected real return should be in stocks, not 0% fixed rate series I bonds. 0% series I bonds are a guaranteed money loser unless you hold for over five years and you're able to pay 0% tax on them.
Short-term:
Nice rate and unbeatable for a no-risk investment. Go ahead if you want.
Long-term:
Those who are concerned about inflation and demand an expected real return should be in stocks, not 0% fixed rate series I bonds. 0% series I bonds are a guaranteed money loser unless you hold for over five years and you're able to pay 0% tax on them.
Short-term:
Nice rate and unbeatable for a no-risk investment. Go ahead if you want.
-
- Posts: 1428
- Joined: Wed Oct 14, 2020 1:52 am
Re: I Bonds variable rate @ 3.54% in May
Again the question is not should I hold this or that bond, the question is do I choose to hold bonds at all? If the answer is yes, I can go through and select what bonds fit my goals, risk profile, etc. If they happen to be I Bonds, great. If it's Total Bond, Intermediate Treasuries, Munis, or something else, so be it. Choosing to hold none is also a choice one can make.grogu wrote: ↑Tue Oct 12, 2021 10:39 pm I guess my point is that 22 years is a long time to hold Ibonds. If you planned on holding something for that long in 1999 or any other year (and to be fair, you may not), then I would argue that, with the possible exception of an emergency fund, you should have put that money in equities. (That's why I can't pull the trigger on EE bonds--they're essentially worthless until year 20.) But I realize such an aggressive position isn’t for everyone.
Making a bit fairer comparison, does anyone have any historical data on the past 5, 10, 20, etc. years average rate of return if, instead of investing in Ibonds you had invested in a high-yield savings account? I just did a quick search but came up empty. I know Ibonds have had a good run over the past year, but there were some years when HYS accounts were paying 3-4%.
Also if I'm choosing to hold bonds (whatever the reason) and I am a long ways off retirement, it may simply be the case that I'm planning to hold some bonds regardless until retirement. So choosing something I can hold at least that long would make sense.
One can reasonably invest their emergency fund and generally come out ahead even on a risk adjusted basis. Though again the question even there is what are one's goals, risk tolerance, timeline for needing the money, etc.
This gets at a more important point (of which the emergency fund is merely an example), is frequently people don't simply have one time horizon far off into the future that they are saving for. Instead they may be saving for a whole variety of different time horizons and may have different levels of risk they are comfortable taking with them. Just to list a few examples to make this concrete, planning for having a child (sometimes expensive fertility treatments are required, also high daycare expenses), buying a house, house maintenance, car maintenance, saving for kids' college, vacation planning, medical expenses, etc. In planning and saving for all these different goals (not to mention the various surprises that come up along the way), having some optionality in terms of what assets to tap and a view for a variety of different time horizons where they might be used, is quite useful. It provides one flexibility. Yes it can mean taking less risk and giving up some return. Though it can also mean taking a bit more risk than one would otherwise (as covered above with the emergency fund). Finding harmony between these different goals is key.
Sure have no problem in diversifying one's fixed income holdings. Agree different options may do well in different time periods (HYSA & T-Bills included). It's also a bit clearer (though can still be hazy) to estimate different future fixed income returns. So having some in various buckets can be useful. Reallocating between them can also be reasonable.
Think most of the people buying EE Bonds are similarly already committing some money to fixed income. IOW they already chose to hold some bonds. Then are deciding which fixed income makes sense to them (in this case EE Bonds). For example a common theme is to use them to handroll an annuity, which can aid in deferring SS or provide more guaranteed income during early retirement (where expenses can be higher). While there is a tendency to view their zero-coupon nature as a bug, it can actually be a feature as one can effectively shelter some future earnings from income/wealth tests (like FAFSA when helping kids apply for college aid). Can understand why such a long lockup can be unnerving. Though it is worth noting that with retirement accounts we are already accepting lockup for a long period of time. Not to say you should by EE Bonds , but there can be a case for them.
Though to get to your larger overarching point, there is a common belief shared by many here that stocks are for the long run. Jeremy Siegel said as much While I certainly hope that is true like most here, not everyone agrees with that assumption. In fact stocks may be even more volatile over the long run. If that's true, I think it is fair to really scrutinize how much risk one is willing to take.
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
Re: I Bonds variable rate @ 3.54% in May
[In the decumulation stage,]tomsense76 wrote: ↑Wed Oct 13, 2021 12:46 amAgain the question is not should I hold this or that bond, the question is do I choose to hold bonds at all? If the answer is yes, I can go through and select what bonds fit my goals, risk profile, etc. If they happen to be I Bonds, great. If it's Total Bond, Intermediate Treasuries, Munis, or something else, so be it. Choosing to hold none is also a choice one can make.grogu wrote: ↑Tue Oct 12, 2021 10:39 pm I guess my point is that 22 years is a long time to hold Ibonds. If you planned on holding something for that long in 1999 or any other year (and to be fair, you may not), then I would argue that, with the possible exception of an emergency fund, you should have put that money in equities. (That's why I can't pull the trigger on EE bonds--they're essentially worthless until year 20.) But I realize such an aggressive position isn’t for everyone.
Making a bit fairer comparison, does anyone have any historical data on the past 5, 10, 20, etc. years average rate of return if, instead of investing in Ibonds you had invested in a high-yield savings account? I just did a quick search but came up empty. I know Ibonds have had a good run over the past year, but there were some years when HYS accounts were paying 3-4%.
Also if I'm choosing to hold bonds (whatever the reason) and I am a long ways off retirement, it may simply be the case that I'm planning to hold some bonds regardless until retirement. So choosing something I can hold at least that long would make sense.
One can reasonably invest their emergency fund and generally come out ahead even on a risk adjusted basis. Though again the question even there is what are one's goals, risk tolerance, timeline for needing the money, etc.
This gets at a more important point (of which the emergency fund is merely an example), is frequently people don't simply have one time horizon far off into the future that they are saving for. Instead they may be saving for a whole variety of different time horizons and may have different levels of risk they are comfortable taking with them. Just to list a few examples to make this concrete, planning for having a child (sometimes expensive fertility treatments are required, also high daycare expenses), buying a house, house maintenance, car maintenance, saving for kids' college, vacation planning, medical expenses, etc. In planning and saving for all these different goals (not to mention the various surprises that come up along the way), having some optionality in terms of what assets to tap and a view for a variety of different time horizons where they might be used, is quite useful. It provides one flexibility. Yes it can mean taking less risk and giving up some return. Though it can also mean taking a bit more risk than one would otherwise (as covered above with the emergency fund). Finding harmony between these different goals is key.
Sure have no problem in diversifying one's fixed income holdings. Agree different options may do well in different time periods (HYSA & T-Bills included). It's also a bit clearer (though can still be hazy) to estimate different future fixed income returns. So having some in various buckets can be useful. Reallocating between them can also be reasonable.
Think most of the people buying EE Bonds are similarly already committing some money to fixed income. IOW they already chose to hold some bonds. Then are deciding which fixed income makes sense to them (in this case EE Bonds). For example a common theme is to use them to handroll an annuity, which can aid in deferring SS or provide more guaranteed income during early retirement (where expenses can be higher). While there is a tendency to view their zero-coupon nature as a bug, it can actually be a feature as one can effectively shelter some future earnings from income/wealth tests (like FAFSA when helping kids apply for college aid). Can understand why such a long lockup can be unnerving. Though it is worth noting that with retirement accounts we are already accepting lockup for a long period of time. Not to say you should by EE Bonds , but there can be a case for them.
Though to get to your larger overarching point, there is a common belief shared by many here that stocks are for the long run. Jeremy Siegel said as much While I certainly hope that is true like most here, not everyone agrees with that assumption. In fact stocks may be even more volatile over the long run. If that's true, I think it is fair to really scrutinize how much risk one is willing to take.
The weird realization to me is : you have a recurring (or just annual expense) that comes over a long (~20 yrs time) that you know ahead of time. Say vacations or a car repeatedly.
I would call this a floor expense?, and want to more or less guarantee the money's there for quite a length of time (~15-20 Yrs?)
To me , this signifies annuities or laddered bonds; nothing else.
-
- Posts: 1428
- Joined: Wed Oct 14, 2020 1:52 am
Re: I Bonds variable rate @ 3.54% in May
Yeah that makes perfect sense.MIretired wrote: ↑Wed Oct 13, 2021 1:01 am [In the decumulation stage,]
The weird realization to me is : you have a recurring (or just annual expense) that comes over a long (~20 yrs time) that you know ahead of time. Say vacations or a car repeatedly.
I would call this a floor expense?, and want to more or less guarantee the money's there for quite a length of time (~15-20 Yrs?)
To me , this signifies annuities or laddered bonds; nothing else.
Annuities have been around for quite a long time (at least since the Romans if not earlier) for exactly that reason. They are fairly intuitive. People have generally always understood the goal is to provide a long stream of income. Maybe that gets lost in many of the investment conversations we have today?
Though agree there's a lot of similarities between laddered bonds and annuities.
On a recent Rational Reminder episode John Cochrane argued, that actually long TIPS are the riskless asset for a long term investor...
He's referencing an idea from a John Campbell and Luis Viceira paper entitled, "Who should buy long-term bonds?". From the paper...Okay, so what's the riskless asset? You're going to tell me it's T-bills, overnight federal funds. No, for a long term investor, the riskless asset is an indexed perpetuity, the longest tip you can get.
This has also been discussed on the forum as well. In particular the "First 20% of bonds in long-term Treasuries" thread ( viewtopic.php?t=287627 ), it is suggested that young investors thinking about bonds go long. The reason being their time horizon is long. Since equities and professional income are presumed to be sufficient for hedging inflation, one doesn't necessarily need them to be TIPS, but one could go that route as noted in this comment ( viewtopic.php?p=4686146#p4686146 ).We show that an infinitely risk-averse investor with zero intertemporal elasticity of substitution in consumption will choose an indexed bond portfolio that is equivalent to an indexed perpetuity, that is, a portfolio that delivers a riskless stream of real consumption. In this way we are able to support the commonsense view that long-term bonds are appropriate for long-lived investors who desire stability of income.
Though it is hard to find a fund that goes long enough with TIPS. So I Bonds or individual TIPS could be purchased to the same effect.
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
Re: I Bonds variable rate @ 3.54% in May
Sep CPI-U just came out.
Nov 1 six month inflation rate will be about 3.5612, for an annualized rate of about 7.12
Nov 1 six month inflation rate will be about 3.5612, for an annualized rate of about 7.12
- anon_investor
- Posts: 15122
- Joined: Mon Jun 03, 2019 1:43 pm
Re: I Bonds variable rate @ 3.54% in May
Add that to my 3.6% bonds, I get 10.72%? I'll take that!!
Unless you try to do something beyond what you have already mastered you will never grow. (Ralph Waldo Emerson)
- sapphire96
- Posts: 193
- Joined: Fri Jun 16, 2017 8:08 pm
Re: I Bonds variable rate @ 3.54% in May
7% bond yields on a government security? I never thought I would see those again!
Keep interest as your friend, not your foe. |
Use money as a tool for bettering your life, not squandering it. |
Stay the course, don’t deviate from it.
- goodenyou
- Posts: 3602
- Joined: Sun Jan 31, 2010 10:57 pm
- Location: Skating to Where the Puck is Going to Be..or on the golf course
Re: I Bonds variable rate @ 3.54% in May
This thread has run its course.
The new thread will be "I Bonds Variable Rate @ 7.12% in November"
The new thread will be "I Bonds Variable Rate @ 7.12% in November"
"Ignorance more frequently begets confidence than does knowledge" |
“At 50, everyone has the face he deserves”
- sapphire96
- Posts: 193
- Joined: Fri Jun 16, 2017 8:08 pm
Re: I Bonds variable rate @ 3.54% in May
Or just rename it to “I Bonds Mega Thread.”
Keep interest as your friend, not your foe. |
Use money as a tool for bettering your life, not squandering it. |
Stay the course, don’t deviate from it.
New I Bond Variable Rate 7.12% for November 2021
[Thread merged into here --admin LadyGeek]
The title says it all.
The title says it all.
Re: New I Bond Variable Rate 7.12% for November 2021
For people who want to read more details about this, https://tipswatch.com/2021/10/13/inflat ... la-at-5-9/
Re: New I Bond Variable Rate 7.12% for November 2021
If you buy on November 1, you get the 7.12% rate immediately?
If you buy today, you get 3.54% for 6 months, and then 7.12% for the 6 months after that?
If you buy today, you get 3.54% for 6 months, and then 7.12% for the 6 months after that?
Vanguard/Fidelity | 76% US Stock | 16% Int'l Stock | 8% Cash
-
- Posts: 1145
- Joined: Mon Feb 18, 2019 7:32 am
Re: New I Bond Variable Rate 7.12% for November 2021
Is this the highest rate since the I-Bonds were introduced?
-
- Posts: 1408
- Joined: Sat Dec 05, 2015 3:33 pm
Re: I Bonds variable rate @ 3.54% in May
.....
Last edited by mary1492 on Thu Sep 29, 2022 8:19 am, edited 1 time in total.
-
- Posts: 25625
- Joined: Thu Apr 05, 2007 8:20 pm
- Location: New York
Re: New I Bond Variable Rate 7.12% for November 2021
Nothing is immediate, you will earn an annualized rate of 7.12 percent over a period of 6 months. Correct on the second question- 3.54 percent for 6 months and 7.12 percent for the following 6 months. That’s a rate of 5.33 percent on a 12 month basis.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
- goodenyou
- Posts: 3602
- Joined: Sun Jan 31, 2010 10:57 pm
- Location: Skating to Where the Puck is Going to Be..or on the golf course
Re: New I Bond Variable Rate 7.12% for November 2021
It is the highest VARIABLE rate portion since I-Bonds were introduced.Escapevelocity wrote: ↑Wed Oct 13, 2021 8:55 am Is this the highest rate since the I-Bonds were introduced?
"Ignorance more frequently begets confidence than does knowledge" |
“At 50, everyone has the face he deserves”
Re: I Bonds variable rate @ 3.54% in May
I've bought my allocation already - what would buying in January give me? Six months of the 7% rate?
Re: I Bonds variable rate @ 3.54% in May
Well it doesn't make sense in terms of open market lending rates. On the other hand it is such small scale in terms of the government budget that it doesn't move the needle.
-
- Posts: 640
- Joined: Mon Mar 26, 2012 11:34 am
- anon_investor
- Posts: 15122
- Joined: Mon Jun 03, 2019 1:43 pm
-
- Posts: 1241
- Joined: Wed Mar 06, 2013 3:15 pm
Re: I Bonds variable rate @ 3.54% in May
"I Bond Heads Rejoice!"
Re: New I Bond Variable Rate 7.12% for November 2021
I am getting some money soon in time for my first-ever I Bond purchase in November. Myself and spouse.
Re: New I Bond Variable Rate 7.12% for November 2021
That's crazy. On the one hand I am glad I have built up a large (for me) I-Bond holding. On the other hand I lament the loss in real terms of my much larger cash/bond holding in my tax deferred accounts.
Just another reminder to diversify. Glad to see the inflation protection paying off, sad to see the inflation.
Just another reminder to diversify. Glad to see the inflation protection paying off, sad to see the inflation.
Re: New I Bond Variable Rate 7.12% for November 2021
DW and I hold a bunch of I-Bonds and love them as a "deep cash" holding. But I think it's important to remember that over time they are really only "inflation neutral'. So that 7.12% looks quite juicy at the moment but it's just locked in for six months and may not ultimately be very meaningful over a long holding period. I am just pointing out the obvious, I guess.
-
- Posts: 3289
- Joined: Mon Nov 24, 2014 10:30 pm
Re: New I Bond Variable Rate 7.12% for November 2021
and... unless an I-bond has a positive fixed rate, they are guaranteed to lose money after taxes..AlmstRtrd wrote: ↑Wed Oct 13, 2021 10:41 amDW and I hold a bunch of I-Bonds and love them as a "deep cash" holding. But I think it's important to remember that over time they are really only "inflation neutral'. So that 7.12% looks quite juicy at the moment but it's just locked in for six months and may not ultimately be very meaningful over a long holding period. I am just pointing out the obvious, I guess.
however, they are better then any TIPS that can be bought currently.
Earned 43 (and counting) credit hours of financial planning related education from a regionally accredited university, but I am not your advisor.
-
- Posts: 821
- Joined: Wed Nov 04, 2009 8:45 am
Re: New I Bond Variable Rate 7.12% for November 2021
One heck of a lot better than a CD!
Edit: Not sure if I have the spare cash flow at the moment, but seriously considering selling some taxable bonds (with little appreciation) to buy bonds here.
Edit: Not sure if I have the spare cash flow at the moment, but seriously considering selling some taxable bonds (with little appreciation) to buy bonds here.
Re: I Bonds variable rate @ 3.54% in May
They were purchased in 6/2000 and 7 and 9 and 10/2000---- $30,000 worth total. They are worth today $100,768 with more growth to come.
Thanks Mel!
Woof
p.s. There were more purchased after those earning 3.0 to 3.4% fixed!
Unless you try to do something beyond what you have already mastered you will never grow. (Ralph Waldo Emerson)
Re: New I Bond Variable Rate 7.12% for November 2021
I find myself wondering: What would cause a change to the fixed rate at this point? AFAICT, it's just by whim of the Treasury rather than some derived metric. Given an uncertain world, I'm hard-pressed to think of any reason for a rational seller not to just keep everything on the variable side and leave the fixed side at 0%.goodenyou wrote: ↑Wed Oct 13, 2021 9:03 amIt is the highest VARIABLE rate portion since I-Bonds were introduced.Escapevelocity wrote: ↑Wed Oct 13, 2021 8:55 am Is this the highest rate since the I-Bonds were introduced?
Re: New I Bond Variable Rate 7.12% for November 2021
Does this mean the funds in my savings account are currently losing nearly 7% to inflation?
Re: New I Bond Variable Rate 7.12% for November 2021
Given all the alternatives for "fixed" these days, I don't see a problem.AlmstRtrd wrote: ↑Wed Oct 13, 2021 10:41 amDW and I hold a bunch of I-Bonds and love them as a "deep cash" holding. But I think it's important to remember that over time they are really only "inflation neutral'. So that 7.12% looks quite juicy at the moment but it's just locked in for six months and may not ultimately be very meaningful over a long holding period. I am just pointing out the obvious, I guess.
- billthecat
- Posts: 1052
- Joined: Tue Jan 24, 2017 1:50 pm
- Location: USA
Re: I Bonds variable rate @ 3.54% in May
Out of my total net worth, I slice off the top 12 mos. of expenses (at a moderate level), in cash. Of the remainder, my age - 11 is fixed income. Of the fixed income, 1/8th is cash (which, to me, includes anything that is not marked to market - checking, savings, I Bonds, CDs, money market, etc.). The other 7/8ths of my FI is total bond. And so 1/8th of FI plus the 12 mos. expenses is in cash (which currently translates to 6.3% of total net worth, 14.7% of FI).anon_investor wrote: ↑Tue Oct 12, 2021 5:52 pmMe too I Bonds are part of my 5-10% "fixed income" allocation.billthecat wrote: ↑Tue Oct 12, 2021 5:42 pmI'm buying I Bonds not as an alternative to stocks. Part of my asset allocation includes a cash allocation, and so I'm buying I Bonds as part of that. I'll gladly take 3.54% (tax deferred and state tax free) over 0.5%.anon_investor wrote: ↑Tue Oct 12, 2021 5:00 pmThe moral of the story is S&P500 and chill... I think...tj wrote: ↑Tue Oct 12, 2021 4:54 pmSo...the solution is to market time and hope for the best?Thesaints wrote: ↑Tue Oct 12, 2021 4:38 pm
Yep. Funny thing is that the return from May 2000 (3.60% fixed rate, highest value ever) to today would be +141%, but if one had invested in the S&P500 it would have been +368%.
Stocks bought at a non particularly good moment (a rather lousy one, actually!) handily beat the return of Savings Bonds bought at the best possible moment !!
We cannot direct the winds but we can adjust our sails • It's later than you think • Ack! Thbbft!
- Mel Lindauer
- Moderator
- Posts: 35782
- Joined: Mon Feb 19, 2007 7:49 pm
- Location: Daytona Beach Shores, Florida
- Contact:
Re: I Bonds variable rate @ 3.54% in May
You're welcome! I ate my own cooking, so I've got lots of those 3.6% I Bonds as well as others in the 3.0 to 3.4% range. The gift that keeps on giving!Sheepdog wrote: ↑Wed Oct 13, 2021 10:55 amThey were purchased in 6/2000 and 7 and 9 and 10/2000---- $30,000 worth total. They are worth today $100,768 with more growth to come.
Thanks Mel!
Woof
p.s. There were more purchased after those earning 3.0 to 3.4% fixed!
Best Regards - Mel |
|
Semper Fi
- anon_investor
- Posts: 15122
- Joined: Mon Jun 03, 2019 1:43 pm
Re: I Bonds variable rate @ 3.54% in May
I am currently targeting a very aggressive 95/5-90/10 AA. I count my EF as part of my FI AA. Currently my AA is around 93/7. My goal is to keep about 2 months of expenses in FDIC insured accounts and the rest of my fixed income in I Bonds. I am also in the process of trying to get my FI% closer to 10%, which I will do with my 2022 I Bond purchase (funded from my anticipated 2021 bonus). Right now my FI allocation is about 60% I Bonds and 40% "cash" (FDIC insured savings accounts and no penalty CDs).billthecat wrote: ↑Wed Oct 13, 2021 11:15 amOut of my total net worth, I slice off the top 12 mos. of expenses (at a moderate level), in cash. Of the remainder, my age - 11 is fixed income. Of the fixed income, 1/8th is cash (which, to me, includes anything that is not marked to market - checking, savings, I Bonds, CDs, money market, etc.). The other 7/8ths of my FI is total bond. And so 1/8th of FI plus the 12 mos. expenses is in cash (which currently translates to 6.3% of total net worth, 14.7% of FI).anon_investor wrote: ↑Tue Oct 12, 2021 5:52 pmMe too I Bonds are part of my 5-10% "fixed income" allocation.billthecat wrote: ↑Tue Oct 12, 2021 5:42 pmI'm buying I Bonds not as an alternative to stocks. Part of my asset allocation includes a cash allocation, and so I'm buying I Bonds as part of that. I'll gladly take 3.54% (tax deferred and state tax free) over 0.5%.anon_investor wrote: ↑Tue Oct 12, 2021 5:00 pmThe moral of the story is S&P500 and chill... I think...
- Mel Lindauer
- Moderator
- Posts: 35782
- Joined: Mon Feb 19, 2007 7:49 pm
- Location: Daytona Beach Shores, Florida
- Contact:
Re: New I Bond Variable Rate 7.12% for November 2021
Yes, less any pittance of a yield they're providing.
Best Regards - Mel |
|
Semper Fi
- anon_investor
- Posts: 15122
- Joined: Mon Jun 03, 2019 1:43 pm
Re: I Bonds variable rate @ 3.54% in May
And I was happy just to snag some 0.2% fixed rate I Bonds in early 2020...Mel Lindauer wrote: ↑Wed Oct 13, 2021 11:21 amYou're welcome! I ate my own cooking, so I've got lots of those 3.6% I Bonds as well as others in the 3.0 to 3.4% range. The gift that keeps on giving!Sheepdog wrote: ↑Wed Oct 13, 2021 10:55 amThey were purchased in 6/2000 and 7 and 9 and 10/2000---- $30,000 worth total. They are worth today $100,768 with more growth to come.
Thanks Mel!
Woof
p.s. There were more purchased after those earning 3.0 to 3.4% fixed!
Re: New I Bond Variable Rate 7.12% for November 2021
This is mostly correct. If you are yielding 0.5% a year and inflation is at, say 7.5% you are yielding -7% in real terms.
The way you hope to offset this is that if nominal yields continue to fall (for example to 0.1% or -0.5% .. yes several European countries have had negative nominal yields for years now) your bonds will go up in value. Of course if interest rates go up then your bonds will get crushed (how much, will depend on their average maturity) and you will face an even larger negative real return.
Last edited by bligh on Wed Oct 13, 2021 11:29 am, edited 4 times in total.
- anon_investor
- Posts: 15122
- Joined: Mon Jun 03, 2019 1:43 pm
Re: New I Bond Variable Rate 7.12% for November 2021
You will get a guaranteed 6 months of 7.12% as long as you buy before May 1, 2022, so you have some time to scrounge up some cash!!!masteraleph wrote: ↑Wed Oct 13, 2021 10:51 am One heck of a lot better than a CD!
Edit: Not sure if I have the spare cash flow at the moment, but seriously considering selling some taxable bonds (with little appreciation) to buy bonds here.
- Mel Lindauer
- Moderator
- Posts: 35782
- Joined: Mon Feb 19, 2007 7:49 pm
- Location: Daytona Beach Shores, Florida
- Contact:
Re: I Bonds variable rate @ 3.54% in May
I'm sure a lot of folks who own the 0% fixed rate would love to have a boatload of those 0.2% fixed rate I Bonds that you own.anon_investor wrote: ↑Wed Oct 13, 2021 11:26 amAnd I was happy just to snag some 0.2% fixed rate I Bonds in early 2020...Mel Lindauer wrote: ↑Wed Oct 13, 2021 11:21 amYou're welcome! I ate my own cooking, so I've got lots of those 3.6% I Bonds as well as others in the 3.0 to 3.4% range. The gift that keeps on giving!Sheepdog wrote: ↑Wed Oct 13, 2021 10:55 amThey were purchased in 6/2000 and 7 and 9 and 10/2000---- $30,000 worth total. They are worth today $100,768 with more growth to come.
Thanks Mel!
Woof
p.s. There were more purchased after those earning 3.0 to 3.4% fixed!
Best Regards - Mel |
|
Semper Fi
Re: New I Bond Variable Rate 7.12% for November 2021
It means they have lost 7% to inflation, except that the 7.12% is an annualized rate extrapolated from semi-annual data, so that is not correct. You have to take into account the previous 6 months 3.54% rate and calculate the composite annual rate: 5.31%.
More simply, you can directly read the 12-months data: 5.39%
-
- Posts: 2776
- Joined: Sat Feb 21, 2015 1:29 pm
Re: New I Bond Variable Rate 7.12% for November 2021
Well, at least I’ll get $10k of it tucked away today after eating my lunch.