Are Saving Bonds a good investment?
Do they appreciate or deppreciate?

I have been told that you can purchase them in $25.00 increments if you so choose. I have been thinking about buying them to help and save for retirement in about 36 years.

I'm only 29 & can afford to spend $25 to $50 bucks a week on them without sweating a brow. A $50 bond a week multiplied by 36 years is around 93K.

 

They're a very low risk investment, and have a correspondingly low return. They're slightly better than inflation. Usually.

At your age, (I'm 29 as well) I would look into a no-load mutual fund through your bank. Pick one that gives you a decent return. You're not going to lose it all if one ocmpany goes under, and if it does take a hit (Not likely now) at least you're not about to retire.

 

That is something that I'm looking for I think is low risk, gaurenteed to be there. I have also been told you can buy a $50.00 bond for about half price, but it won't mature for 20 years or better.

I have a very good employer that is generous with his money. He gives all his employee's that have been there over a year $4.50/hr. on top of there regular hourly rate. The only downfall is that $4.50/hr. has to be 401k'ed.

I figured it is free money, so my 401K is all high risk investments. For some strange reason I did pretty good this year with it. But is isn't gaurenteed to be there next year or let alone 36 years down the road.

 

An EE series bond will mature (reach face value) in roughly 5-8 years, depending on the interest rate. There is no longer a fixed maturity term. They continue collecting interest for 30 years.

They're not a BAD investment, there are just better ones out there for someone still young. Real estate is ALWAYS a good investment, but I wouldn't recommend it for someone who has to worry about splitting up assets down the road...

If the 401k is going in the stock market, and it's managed well, it will do fine. Good fund managers will spread the money out over a lot of different companies. A few blue chip, a few high risk, a few tech companies, etc. You have to worry when all your eggs are in one basket, and that basket turns out to be Adelphia or Enron.

 

So it is safe to invest in Martha Stewart? OK, bad joke. I'll quite now.


I'm just looking for advise now. I don't trust to many people with my money. I've been with the same CU now for 10 years and just starting to trust them.

I figured maybe $25-$50 a week would be good for savings bonds. Maybe just $25. I'm going to blow the money any how. Why not blow it on something that I can use in the future?

 

Bonds go hand in hand with interest rates. When the feds raise interest rates the value of bonds goes down. Bonds, as far as I understand them, are good for balancing a higher risk portfolio, or if you were close to retirement and want to protect your retirement savings, then you could place your money in bonds where they will not depreciate. You are young and can afford to be in the higher risk investment, especially if you have no wealth and would like to build some.
The good thing about 401k is that all contributions are taken out of your check before taxes. I contribute 10% to mine, plus another 10% to company stock, which I get at a 15% discount twice per year.
I'm in the same boat that you are in. I'm 30 and looking to invest. I spoke with a UBS Financial Services broker yesterday and he suggested getting into a balanced mutual fund. Balanced being that they deal in Bonds and Stocks. They are less volatile because they deal with multiple stocks. So, for instance, if you own 1000 shares of Samsung and Samsung takes a dive then you loose lots of money, but your mutual fund would not, even if it invests in Samsung, because it will also invest in other sectors.
I'm going way further than you asked about, but I hope this helps. If anyone sees anything wrong with what I said, please correct me because I'm learning too.
Personal Finance for Dummies is a great source of info too, but I haven't had a chance to read all of it yet. Good Luck!

 

I think savings bonds are a wonderful investment. Buy one for your child, friends children, whoever when they are born.
My grandmother made ours payable upon her death.
They continue to earn intrest as long as they are sitting. Decades of a long forgotten savings bond makes a nice suprise.
Also, they are able to be cashed in by the purchaser....if you wanted or needed.

 

IMO, US savings bonds add a new perspective to the meaning of junk bonds. Their return is lousy/boring and their issuer has a history of being irresponsible due to the fact that they run in the red constantly. With that in mind, and since you already have what you consider to be high risk investments, why not consider a growth and income mutual fund. These medium risk funds generate returns from not just growth on stocks but dividends and any gains from the bonds. Read the prospectus to see what percentages are in stocks/bonds and see what the max/min percentages are. Finally, and as always, if you are loosing sleep worrying about one of your investments, then you probably should not own it.

Remember to consider how long it will be before you want to tap into the cash kitty. If you need the money in less than five years, stay conservative, if you have a longer time frame then you can ride out the highs and lows that go with higher risk and higher reward investments. One little rule of thumb is to invest a precentage of money in bonds that equals your age. By doing so, you will be increasing the percentage as you get older and thus lessening your exposure to swings in the stock market.

 

US Savings bonds are a LOUSY investment for young people. The basic bread-winner of an American family should do two things:

(1) BUY a house & property
(2a) Max your company's contribution to your 401K or 403B.

(2b) If your employer doesn't offer 401K, then open a traditional or Roth IRA ($3000/year max contribution) and invest in mutual funds.

Mutual funds and regular bonds have "expense ratio's" you can use to compare the "cost". Mutual funds are a bit more (about 1.4% compared to 1.1% for bonds) but ... they usually bring more return.

But above all else, buy a home & property. Given the loss on rent, loss on tax deduction, loss on equity build-up, and loss on property value increase, you are losing THE MOST MONEY by not owning. 80% to 90% of your "savings" value comes from simply buying a home.

 

Quote: They're not a BAD investment, there are just better ones out there for someone still young. Real estate is ALWAYS a good investment, but I wouldn't recommend it for someone who has to worry about splitting up assets down the road...

Beware of any advice that contains the word "always".
Dono

 

Real estate has outpaced the stock markets for as long as I can remember, but there is still a risk of losing money. If you want no risk, a decent return and access to the money, look at an market indexed annuity. The returns aren't as great as some other investments, but there are some advantages. It is an insurance product, and as such it is protected from creditors, bankruptcy and other things. Your pricipal is guaranteed not to lose money, some offer a bonus on any money you put in, and will gain at the rate of the market it is indexed to. There can be a limit to the gains you can have; most seem to cap out at about 4% per month, which is still about 50% annually.

The worst place to be is in cash. Just to keep up with inflation, your money needs to double about every 15 years.

 

The US Treasury has a Web site that can answer the majority of all your questions about Savings Bonds.

While you are there, look into the bonds that have inflation protection built in. These pay interest and are adjusted according to the rate of inflation. They only adjust forward and not backward.

I won't get into WHAT is a good investment. Keep in mind you are looking at 30 plus years of investing (long term).

My company had a payroll deduction for savings bonds and I took advantage. While their are better investments out there, at least I didn't leave that money at a bar or casino.

I just retired and the pile of bonds that I "forgot about" is nice to have.

The biggest killer of any long term investment is inflation and if you must borrow to invest (ie: property - house - land) factor in the interest rate of the loan to the overall cost of the item.

Good Luck

 

IMO. Whatever you do, don't put all your eggs in one basket. Nothing wrong with putting 25% in EE bonds, 25% in CD's or money market fund and 50% in mutual funds. I have three smaller mutuals instead of one big one. (not so big with my pay but you get the point).

With cd's and money markets you enjoy some liquidity and there is security. with EE bonds You buy them for half of the mature value, you can get at least your investment back after a minimal period of time and as stated above, if they mature in 10 years you don't have to cash them out then. And you can let them continue to accrue interest for 30 years. And, if I am not mistaken, you can cash them out early and still get the interest you have earned to date.

At your age you may want to assume more risk with the probablility of a higher return. As you get older and retirement approaches you will want to reduce yoru risk. No matter what you do though, set aside the risk vs return issue, don't let anyone talk you into investing in something. You have to be comfortable with it.

Dollar cost averaging is the way to go for most investors. That means you invest the same amount periodically no matter what the market is doing. Eventually your averages will work out to decent long term returns.

IMO again, if you have credit card debt, pay that off first, as fast as you can with some of the money you plan on investing. Especially if you are paying more than 12% interest.

"Compounding interest is the greatest mathematical discovery of all time". Albert Einstein

 

I don't know. Everyone has there own reasons & ideas about investments.

The reason why I asked about the savings bonds is basically for a idea. I feel that I have a very good 401K with my employer. And to tell you the truth, I don't think I'm going to live to be a ripe old age as most. I'm only 29 and have had several brushes with death to give me a strange idea.

I guess I was more or less thinking about my kids. I don't have alot of money & most of my material possesions came from garage sales. This has been a trend in my family that I thought that I could possibly break. When I do go to a greater spirit, I would love to be able to leave something behind for my kids. You know what I mean? Something almost gaurenteed to be there.

I have thought about putting money in normal savings accounts for them. But to be honest, I'm rather careless when it comes to money. This is when I began thinking about savings bonds. I'm more then likely am going to hold onto a $50.00 savings bond instead of a $50.00 bill.

But my next question is about the interest rates of them.
The quote below is from the US Treasury website.

Does this mean if I purchase a $50.00 bond today at 2.84% interest & in 2 months the rates go up to 7% does my bond still end up collecting the 2.84% or does my bond start collecting the 7% rate?

 

They will earn interest at the rate the Treasury sets until they change it. So, if they earn 2% now and later it is changed to 7%, they will earn 7% from the date they changed it until they change it again.

Like I said before, look at the "I" bonds. They get adjusted for the rate of inflation and you earn interest. I think this is a pretty good deal (inflation wise) because eaven if you earn 7% and the inflation is 10%, you are not keeping up with the rate of inflation.

I mention this because today inflation is at an alltime low. But if you go back to the 80's, inflation was rolling along at 10 - 20%/year.

With this oil thing going on now, I predict that prices on most everthing will head up to cover the increased cost of production. As prices head up, workers will want more to pay for things that will cost more.

On a final note, if you intend to leave the bonds to your kids, be sure to have the bonds state POD to (kids name). They will benefit from the stepped up value from your estate and the estate will pay the income tax if any is due. If you have them as joint owners or put them in their name, the will pay income tax on the interest earned when the bonds are cashed. This of course is according to today's tax laws. Who knows what the laws will be 30 years from now.