And some of us view the "no zag potential" of I/EE Bonds as a "feature" not a problem.Noobvestor wrote: ↑Tue Oct 26, 2021 8:58 pmLiquid after one year (with three-month interest penalty) and if you want flight-to-safety/correlation effects, a Treasury index pairs well with I Bonds. I have enough in liquid bond funds that I can rebalance a long way down without having to think about tapping into I Bonds.
As always, it's a matter of alternatives. TIPS have a guaranteed after-tax real loss too right now. And if that changes: sell I Bonds, buy TIPS.
First, that makes them very simple to understand - and thus predict and plan for the future. No complicated "how much will the value rise/fall if interest rates fall/rise".
In fact that's part of what gives EE Bonds their "annuity like" ability, as you'll know exactly how much you'll have [nominally] in 20 years the day you purchase them.
Second, for those that view bonds as "safer" investments, it removes the interest rate risk and market risk (don't have to worry about people panicking and selling and driving I Bond prices lower). And they already have basically zero credit risk (unless you think the US Government plans to default) and no inflation risk (since they are inflation adjusted). Minimizes tax risks, since they are free from state/local taxes and federal taxes can be deferred up to 30 years giving you "tax arbitrage". Not sure how much "safer" one could get...
Lastly, it helps avoid behavioral risks like trying to "time" the right time to sell by guessing if the market rate is going up or not.