Are I Bonds the Best Place To Park Short Funds?

OneEyedDiva said:
What math method or app did you use to come up with the total portfolio percentage? "If ten percent of your portfolio is in cash with an annual return of 1.00% and the other ninety percent of your portfolio is invested in the market returning 7.50% your total portfolio is still returning a respectable 6.85%."
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I backed into it.

10% $ 100,000.00 x 1.00% = $ 1,000.00
90% $ 900,000.00 x 7.50% = $ 67,500.00
100% $1,000,000.00 x ? = $ 68,500.00

$68,500.00 ÷ $1,000,000.00 = 6.85%
 

OneEyedDiva said:
Muslims are instructed to stay away from Riba (interest). We are not to pay it or charge it. However, more progressive Muslim scholars who recognize it's almost impossible to avoid interest in todays society say that up to 5% of one's assets is acceptable, but we are advised to purge ourselves of interest we may accrue by donating it to non Islamic entities.
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Christianity was much the same, but I always thought the instruction was to avoid dealing with criminal elements that break knee caps if you don't pay... that sort of thing. Money, interest, loans, mortgages, and business are all interrelated, and the major economies in the world run on it to the advantage of both the borrowers and lenders. I don't want to start a religious debate, but I don't think that rule applies in modern times. But there are individuals that don't borrow or lend, and they get by. I don't pay interest, and I don't borrow from banks. Although, I did to get where I am today. I don't borrow, because I'm financially comfortable, not wealthy, but loans are not something I need at this point in my life, but to guys who understand business and run corporations, borrowing and lending is their life's blood.
 

JustDave said:
Christianity was much the same, but I always thought the instruction was to avoid dealing with criminal elements that break knee caps if you don't pay... that sort of thing. Money, interest, loans, mortgages, and business are all interrelated, and the major economies in the world run on it to the advantage of both the borrowers and lenders. I don't want to start a religious debate, but I don't think that rule applies in modern times. But there are individuals that don't borrow or lend, and they get by. I don't pay interest, and I don't borrow from banks. Although, I did to get where I am today. I don't borrow, because I'm financially comfortable, not wealthy, but loans are not something I need at this point in my life, but to guys who understand business and run corporations, borrowing and lending is their life's blood.
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As I pointed out, the rule about interest was "updated" a bit but certainly still applies, believe me. There is Islamic literature that explains what is an isn't acceptable. I was Christian for over half my life. I don't remember hearing or reading anything about not paying interest. Even before I accepted Islam, I didn't believe in paying interest or fees. The uber rich will still be uber rich whether you and I pay them extra money or not.
 
There is a part in the Bible about usury: The practice of lending money and charging the borrower interest, especially at an exorbitant or illegally high rate, which is not what modern day banking does. Jesus supposedly overturned tables and threw the money lenders out of the temple, but as my pastor explained to me they were engaging in usury: as in taking advantage of the misery of others.
 
JustDave said:
I Bonds sure beat the heck out of savings accounts and CDs. I just bought a $10,000 dollar I Bond last month. It's paying 7%. You can only buy that amount once a year. Had I waited another month, it would be up around 12% I think. I have three that I bought back in 2001, and they pay even more. The best payback is in the stock market long term, but that place drives me nuts.
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Are you saying you bought I bonds in 2001 that paid over 7%?
 
oldman said:
Are you saying you bought I bonds in 2001 that paid over 7%?
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I was guessing based on how much dollar amount of interest I collect on them now. I may have figured that based on what those bonds are worth today, which is double. In truth, I can't remember what the interest rate was back then. Do you know what a 2001 I Bond paid? I'd like to know, just to compare them with today's rate.
 
JustDave said:
I was guessing based on how much dollar amount of interest I collect on them now. I may have figured that based on what those bonds are worth today, which is double. In truth, I can't remember what the interest rate was back then. Do you know what a 2001 I Bond paid? I'd like to know, just to compare them with today's rate.
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I was thinking back then maybe around 2%. But, that’s just a guess. I also bought some of those (what we called back then) Jimmy Carter CDs that paid somewhere around 16-18% interest. My dad was in the Army as a career and he spent half if his check every month buying them. I think he even borrowed against our house to buy them.
 
oldman said:
I was thinking back then maybe around 2%. But, that’s just a guess. I also bought some of those (what we called back then) Jimmy Carter CDs that paid somewhere around 16-18% interest. My dad was in the Army as a career and he spent half if his check every month buying them. I think he even borrowed against our house to buy them.
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I'm sure they were more than 2%. I would not have bought them at that rate. I bought 3 at $10,000 each, because I remember them being a very good deal. I think maybe $30,000 was a yearly limit, but I'm not sure. The next year, I went to buy more, and the return was way down, probably at 2%, so I didn't buy another until last month. I wish I had waited, because I was sure the rate would go up. I even read that it was likely to go up, but then I read another report that said, "Don't wait. Buy them now." By that time, I was sick of thinking about money and betting one way or another, so I just bought what I could. I'm not what is known as a savvy investor. I just want to park some money, and forget about it. I guess I have better things to think about. My brother in law is good at the stock market (so my sister says, anyway), but I'm not interested.
 
OneEyedDiva said:
Muslims are instructed to stay away from Riba (interest). We are not to pay it or charge it. However, more progressive Muslim scholars who recognize it's almost impossible to avoid interest in todays society say that up to 5% of one's assets is acceptable, but we are advised to purge ourselves of interest we may accrue by donating it to non Islamic entities. During the time of Prophet Muhammad (PBUH) interest was seen as something that made the rich richer and helped keep the poor impoverished, thus was seen as haram (harmful). Sounds like what's going on in modern times doesn't it? We can collect dividends and capital gains, however, since they are seen as income from different sources as interest. For me they are significant enough that getting the paltry rate of interest on my bank savings accounts (which I wind up purging anyway) doesn't bother me. I had to be mindful when opening up one of my credit union accounts because what they were touting as dividends was really interest. I opted for an Islamic savings which doesn't pay interest.
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Thank you so much for explaining this, @OneEyedDiva.
 
StarSong said:
DH & I bought the max last November and again this year. I-bonds limit purchases to $10,000 per person per year.
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You can buy a bond as a gift, to be presented at a later time of you choosing. The gift bond goes into a "gift box" until it is presented. While in the gift box, it earns interest just like any other similar bond.

Nothing precludes you and your spouse from buying gift bonds for each other. If your spouse has already purchased an iBond this year, you can't present your gift bond this year, but you can present it in future years.
 
Problem with these bonds is you can only buy a small amount of them each year. Thinking next year CD rates will be a good buy. Hey, its a set up similar to the 80's and CD's were 17-18% for like 20 minutes back then.
Sigh...for right now, just sticking to the good dividend growth funds at 3-1/2% is where its at I guess.
 
HarryHawk said:
You can buy a bond as a gift, to be presented at a later time of you choosing. The gift bond goes into a "gift box" until it is presented. While in the gift box, it earns interest just like any other similar bond.

Nothing precludes you and your spouse from buying gift bonds for each other. If your spouse has already purchased an iBond this year, you can't present your gift bond this year, but you can present it in future years.
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Thanks for the tip. I found these very helpful websites on that subject:
https://seekingalpha.com/article/45...-to-double-down-on-current-8-53-percent-yield
https://thefinancebuff.com/buy-i-bonds-as-gift.html
 
JustDave said:
I'm sure they were more than 2%. I would not have bought them at that rate. I bought 3 at $10,000 each, because I remember them being a very good deal. I think maybe $30,000 was a yearly limit, but I'm not sure. The next year, I went to buy more, and the return was way down, probably at 2%, so I didn't buy another until last month. I wish I had waited, because I was sure the rate would go up. I even read that it was likely to go up, but then I read another report that said, "Don't wait. Buy them now." By that time, I was sick of thinking about money and betting one way or another, so I just bought what I could. I'm not what is known as a savvy investor. I just want to park some money, and forget about it. I guess I have better things to think about. My brother in law is good at the stock market (so my sister says, anyway), but I'm not interested.
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If you go to cash one, you will pay tax on the interest of $10,000 all at once, but if you bought bonds in $1,000 increments, you could cash them a little at a time as needed, and pay less tax for that year and possibly stay in a lower bracket.
 
Myquest55 said:
StarSong - I saw that note about I-bonds. You buy in at the face value and they earn interest. They are 30 year bonds and you have to hold them for at least 5 years before you can cash them without a penalty. Still, I thought I could spare some $$ for one or two. (The minimum amount is $25)

I looked into opening a Treasury Direct Account so I could buy one but their set up was INSANE! They wanted so much information as well as passwords, secret photos, captions, etc.....I just closed the window and backed away. Gone are the days you could buy a bond at a bank. Sigh.
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I opened an account with them and arranged for monthly payments to be automatically deposited. Well, I have had to give up on the whole shebang. First of all, I noticed that the first payment never went through, and then the nightmare started. They have hellish wait times if you telephone them, and many times will tell you that they are not going to answer the phone at all. Emails are the same. They will only accept an email from you if you are signed into your account, and God help you if you misspell your password and you get locked out; good luck ever getting back in with the extremely awful interface of their website and their hold times.

After a forty five minute hold time, I was finally able to reach a human, and was told that I should have entered all those zeros in front of the routing number. But now I can't get hold of anyone to correct it, I have had to give up on it. For laughs, the recording that plays while you are hold encourages you to please visit their updated and streamlined website. I really wish I could find that website!
 
Myquest55 said:
I looked into opening a Treasury Direct Account so I could buy one but their set up was INSANE! They wanted so much information as well as passwords, secret photos, captions, etc.....I just closed the window and backed away. Gone are the days you could buy a bond at a bank. Sigh.
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Yes, I believe it's the least user friendly procedure I've ever encountered. I finally, got to a point where I had an account, but I was unable to access it. For some reason they needed some notorized (actually it was one step above notorized) statement from my bank, which the bank then had to deal with and required a lot of phone calls from my bank to their head bank. Just for them to figure out how to fill out Treasury Direct's form took nothing less than 45 minutes. I was on the phone all the time while the bank was figuring it out. And then this had to be mailed in. After all that, it took two weeks for Treasury Direct to OK it. Apparently, the last part with the bank was not always necessary as Treasury Direct actually appologized because this last glitch doesn't always happen. Why me? I have no idea.

Now I'm good to go, at least until the next snag comes along. Twenty years ago, you could just go down to any bank and buy an I Bond, which took less than 10 minutes. I understand you can still cash them it at a bank. But I don't know how this is done, because you no longer hold a paper bond that you can take to the bank and trade for cash. I assume the bank accesses your account to verify the bond, but if it takes them 45 minutes of phone calls, and another 30 minutes to do the paperwork, they won't be too happy about it.
 
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OneEyedDiva said:
As you know MDB, I can't invest in bonds personally, so I don't know anything about I-Bonds. But I have been thinking about what is the best move for those who can and want to avoid stock market volatility so I'll probably learn something new by reading through this thread.
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I don't get it. How can somebody named "One Eyed Diva" not invest in Eye-bonds???? :)
 
JustDave said:
Y

But I don't know how this is done, because you no longer hold a paper bond that you can take to the bank and trade for cash.
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FWIW, I bought a few I-bonds earlier this year when I directed the IRS to refund my tax over withholding in I-bonds. They ended up sending me four (4) traditional paper bonds. I could keep them locked up. But, instead I sent them to the Treasury where they were converted to electronic form and stored in my TD account. So far so good.

From what I have heard many banks choose not to redeem I-bonds anymore. Has anybody tried to redeem a US savings bond (E or I) at a bank and been told the bank won't redeem it?

What may kill I-bonds is the lousy service from the Treasury. A friend somehow got locked out of his account. He waited for nearly three hours on the phone until his call was answered and he could get his account unlocked. That kind of service would kill an ordinary bank or investment firm.
 
The people at the two banks I have asked about cashing I Bonds, said they would accept them. Whether that applied to both paper and electronic, I don't know. I didn't even know they don't sell the paper ones anymore.
 
Pecos said:
I have a fairly large pot of money currently parked in a CD that is paying 3%. I am planning to use that money to move to Washington within a couple of years and I want to be absolutely sure that it will be there went we make our move.

Unfortunately, my CD is maturing in the next few weeks and the best interest rates I can find are about 1% or less and carry longer terms than I want. U.S. Government I bonds, which will pay slightly more, are starting to look like my best alternative for at least part of these funds. I will be limited to $10K each calendar year, and can park another $10K in an account for my wife. We can move another $20K into I bonds next year.

I have looked at short term corporate bond funds, but they still look more volatile than I want.

So what is your opinion about I bonds, particularly those bought directly from the Government Treasury Website? Has anyone encountered any difficulty getting their money back in a timely manner? Does anyone expect that regular CD's will start paying more than the inflation rate anytime so
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Patricia said:
A finanacial advisor said you can only buy one government bond per year, but I didn't confirm that information.
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I doubt if that is true. I have bought multiple I-bonds this year. But, I was not able to buy a total of more than $10,000 dollars.
 
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