Please consider not reading this article about bonds and call me instead. The complexity of bonds makes them easier for me to discuss over the phone than to write about succinctly.
A proper investment plan acknowledges that your portfolio will take a hit -- sometimes a big one -- from time to time. Now is one of those times. No matter how much you plan for downturns, they can be painful to endure.
The Dow Jones Industrial Average is famous for being famous. As one advisor noted in a recent blog post "the Dow is ingrained in our subconsciousness as the premier benchmark for US stocks, which doesn't make any sense if you understand how the index works."
A headline touting how the stock market will perform in a week's time should be ignored as nonsensical. Anything can happen in a week. A month is equally unpredictable. But prognostications about the stock market for the upcoming year appeal to many people as worthy of consideration.
Low interest rates have reduced the attractiveness of fixed income investments, especially with the recent spike in inflation. But rising inflation has made I Bonds appealing, at least for the next few months -- they are paying 7.12% on an annualized basis!
I Bonds are U.S. government savings bonds that earn a composite of a fixed interest rate and an inflation rate. While currently the fixed rate is zero, the inflation rate is 3.56%. The inflation rate, however, resets every six months. Your rate of return will thus vary over time, dropping if inflation dissipates.
To learn more, see the following links from TreasuryDirect:
please note that you cannot buy I Bonds through your brokerage account (like Schwab). You need to purchase them directly from the U.S. Treasury. I Bonds must be held at least 12 months and penalties exist for withdrawals prior to five years. There are limits to how much you can purchase -- $10,000 per person, per calendar year (with additional opportunities in specified situations). The links above tell the whole story. I'm also happy to be a resource.
Words of Wisdom
Bargain ... anything a customer thinks the store is losing money on. -- Kin Hubbard
More Articles ...
- How Technological Advances Impact Inflation as Measured by CPI
- How Six U.S. Stocks Dominate
- When Time is Not Like Money
- What's Up with Bonds? They're Down!