I-Bonds (The best place to park your money right now)
Right now, inflation is ravaging the world & everyone’s pocket book, with the recent CPI (Consumer Price Index) up 6.8% in November. Unfortunately, this is likely to have outsized impacts on those who can least afford it. Luckily, there is a guaranteed hedge for inflation, guaranteed by the US government, and now is the perfect time to buy it.
Series I savings bonds were designed for this exact purpose, keeping your money safe from inflation, and the US government guarantees them to perform that function. Unfortunately, the government knew how attractive they could be (currently offering 7.12% interest, vs. 1.54% on a normal savings bond), and thus capped your ability to purchase them to $10,000/year. Despite the restrictions, this excellent return almost meets the historic s&p rate, and is literally guaranteed by the safest group in the world. For anyone looking to keep their money safe, and anyone that has cash just lying around in the bank, these are an excellent option for you!
There are a few tax implications, since the bonds are federally taxed, but are exempt from state & local taxes. Additionally, you can get around the federal tax if you use it for higher education in some instances.
Finally, although the restriction seems onerous to some of you, if you buy them right now, you can buy another $10,000 the day after in 2022. Also, your spouse or kids above 18 years of age can also have bonds bought in their name, so you can really still rack up quite an investment into these types of bonds.
Overall, the investment thesis is quite simple, these are bonds designed to be good investments purposefully by the US government during times of inflation - a time that we are in now. Essentially, you get an almost risk-free 5.5-6% gain just for buying these series I-bonds instead of a plain old Treasury Bond.
By: Mateo Gjinali
Comments