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Dear friends,
There is no such thing as to good to be true, but this might be the closest thing that we have.
The best kept secret in finance are inflation bonds that are about to get 9.6% RISK FREE starting in May.
As we know, inflation is SOARING to a 40+ year record of 8.5%. The United States Treasury offers bonds that track inflation. The interest compounds every month and the rate is reassessed every May and November.
The bonds haven’t been popular in the past, but this has changed recently due to soaring inflation.
For example, over the last 6 months nearly $11 Billion worth of I-bonds have been issued, compared with around $1.2 billion during the same period in 2020 and 2021.
I-Bonds are guaranteed by the federal government. The bonds pay a fixed rate that is set by the treasury, plus an inflation-adjusted rate that is determined by the change in inflation over the past 6 months.
Due to the soaring of inflation, I-bonds are turning into a top yielding asset even though they carry virtually no risk.
For investors seeking a safe and high-yielding investment, there is “nothing nearly as good as the I-bond right now” according to Joshua Rauh, a senior fellow at Stanford’s Hoover Institution.
The reason that you probably haven’t heard about I-bonds is because you cannot purchase them through a bank or brokerage. This means that they don’t pay commissions or expenses so financial advisors haven’t been talking about them very much.
There is only one way to purchase I-bonds and this is through the United States Treasury Website that is called TreasuryDirect,
You would need to open an account with the Treasury, submit all the required information, and then you would wire the money to the treasury.
IRS Form 1099-INT is provided after you cash the bond for you taxes.
This link will give you details to the I-bonds.
Downsides of I bonds
Obviously everything has their downsides but with inflation bonds they are far and few between.
Inflation bonds are limited to $10,000 per person or $20,000 per married couple.
Another one of the drawbacks of I bonds is you can’t redeem them for at least one year, and if you redeem them before 5 years, you will lose a 3 months worth of inflation.
The easiest way to navigate this is to focus on 15 months of savings. If you do it for 15 months, this would be the equivalent of one year of interest.
For example, if you are an individual that keeps the money in an I-bond, you would make around $950 in 15 months from interest while a married couple would make around $1,800. This could be a rent/mortgage payment for someone in 15 months.
The other downside is lower returns due to inflation. If inflation were to decrease, your rate might change in November.
Savings Account
In my opinion, this is GREAT for someone who has money in a savings account that they don’t need for 2 years+ BUT they don’t want to invest the money into the stock market.
If you have any questions about Inflation Bonds don’t hestitate to send me an email! I am not a financial advisor, but I can help you navigate it best that I can!
If you have any questions, feedback, or just wanna say hey, email me at mattallenletter@gmail.com
Stay Hungry, Stay Long,
Matt Allen