Buy US Savings Bonds

If you are looking for a low-risk investment opportunity, buy US savings bonds. These bonds bear interest and are issued by the government. They are non-transferable once purchased and often sold at less than face value, which means there is room for interest to accumulate over the years. The U.S. government is obligated to fulfill their bonds, therefore US savings bonds are a safe bet. The return rate does fluctuate now and then depending on inflation and dominant interest rates. However, over a period of many years this should not make much difference in the return you receive.

The history of US savings bonds goes back to World War I, when they were first created to finance the country’s involvement in the war. Today, there are two different kinds of available bonds — series EE and series I. You should understand the difference before you make a purchase of savings bonds. Series EE bonds pay variable interest rates, however calculations put it as 90 percent average yield on five year securities over the last six months. This means that every six months, the average yield is calculated. Then, the new yield is announced, and is 90 percent of the calculated figure.

Bonds issued later than May 2005 are different, and resemble a certificate of deposit (CD) in that the rate of interest is fixed. The interest is figured monthly but not paid until bond redemption. You should know that Series EE bonds are made for individuals as opposed to investment institutions. Also, upon redemption the interest is federally taxed. Now, let’s move on to discuss the other type of savings bond, Series I.

The yield on Series I bonds also fluctuates, however the fluctuations are mostly based on inflation. Part of the Series I bond interest is fixed that is the same throughout the life of the bond. The rates are calculated every May and November. If you were an investor before 2004, you may have heard of series HH bonds, which were removed. However if you still hold a series HH bond it is still valid and can be redeemed upon maturity.

You can buy US savings bonds from your bank, credit union or investment firm. The professionals at these financial institutions can help you decide which bond is right for you, how much the bond should be for and for how long it should be held. Bonds are low-risk, long term investments that are a good addition to a well-rounded investment portfolio.

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