Stupid I-Bond Advice
I came across this personal finance article today in the Philadelphia Inquirer today that gives the following advice regarding I-Bonds:
Thinking of buying inflation-adjusted U.S. savings bonds? Then gather your cash quickly. Chances are, you’ll get a better deal with I-bonds purchased this month than with the ones coming to market Nov. 1.
The reasoning?
Bonds sold from the start of May through the end of October pay annual interest of 2.41 percent. That comes from a variable rate of 1.01 percent, plus a fixed rate of 1.4 percent…
The bonds coming next month may pay a fixed rate as low as 1 percent, says Daniel J. Pederson, author of Savings Bonds: When to Hold, When to Fold, and Everything in Between. Pederson expects the variable rate to go to 3.6 percent, taking the total to 4.6 percent. If so, investors would be better off locking in today’s higher fixed rate, even though they won’t make as much during the first six months…
While the information is accurate (being generous and assuming that the fixed rate will actually decrease which in reality is anyone’s guess), it’s stupid advice because it doesn’t take into account the reality of other ways that you can safely invest your money. Why would any person that is supposed to be knowledgeable about personal finances give advice to accept 2.41% for six months in the hopes that they will receive 4.6% the next 6 months when they can receive over 5% in an online bank? This is a classic example where information on a specific subject that is true is assumed to be “good advice” without taking into account the reality of the financial markets today. In doing so, the author gives just plain bad advice
Want good advice? Stay away from I-Bonds for the time being because there are far better places to put your money that will earn you more without any additional risk.
It is awful advice. This self-proclaimed ‘expert’ probably is not an investor.
HSBC / other banks also give better liquidity than those bonds.
Many people think internet banks are scams. Most are actually a very safe way to keep your money growing above the inflation rate.