For most people, investing their money involves CDs that pay a small fraction of a percent in yearly interest or playing roulette in the stock market, which is at record heights.
Many with strong stomachs are turning to cryptocurrencies like bitcoins.
There is another investment vehicle which frankly I was unaware of until recently – high yielding I-Bonds.
I-Bonds – compared to banks – pay a staggering a 3.54 percent annual interest and are about as safe as you can get.
The hitch: you can only invest $10,000 a year – per household member.
But you get the guarantee from the U.S. Government that your investment will remain safe and so will your interest at least at the rate of the official cost of living.
Plus they’re not taxed by states and municipalities.
You are taxed by the IRS. You have the option to delaying paying taxes on the interest until you cash them in or at their 30-year maturity. But those in lower and middle income range may not have to pay taxes on the income if they use the money for college tuition.
I learned about them from Jason Zweig in his weekly The Intelligent Investor which I religiously read every week. You too can sign up for it, its one of the few things you can read for free from the esteemed Wall Street Journal. And every one in a while you can get a hugely discounted introductory rate, now at $4 a month.
Jason Zweig
“In today’s yield-parched world, money-market funds are paying 0.02%, bank savings accounts 0.13%, a three-month Treasury bill 0.15% and even a 30-year Treasury bond only 2.25%. The income on I bonds is so juicy, it’s barely below that of leading high-yield or “junk” bond funds, which are much riskier,” he wrote in his column today.
Other recent columns:
Why You Shouldn’t Buy Bitcoin When You’re Hungry May 21, 202
Want to Get Rich Quick? Who Can Stop You? May 7, 2021
What Happens When Stocks Only Go Up April 30, 2021
Forbes recently also wrote a column on this great investment, pointing out that “To buy I-bonds and keep track of them, go to the Treasury website, set up an account, and watch your money grow.”
I bonds aren’t as liquid as a bank account, money fund or Treasury bill. You can’t cash out until you’ve held for 12 months. If you redeem within the first five years, you’ll forfeit the last three months of interest. But they’re as liquid as other 30-year bonds—and, if you sell after the first five years, your full recovery of principal and your ability to match or outpace inflation are both guaranteed.
If you buy an I bond at today’s 3.54% rate and sell it one year and a day from now, you’ll earn 2.65% after the penalty (assuming the rate doesn’t change). That’s roughly quadruple what you’d get from a one-year certificate of deposit or ultra-short-term bond fund.
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