Jan 6th, 2009
My Best 2008 Investment
A rather small portion of my portfolio–about 1.5%–was made up of the best investment I had in 2008.
What was it?
Series I United States savings bonds. Seriously.
The I in Series I stands for inflation. Unlike other bonds which are bought below their face value and pay their face value when mature, these are bought at face value and proceed to pay interest. Additionally, these bonds have two interest bearing components to them, a “base” rate that is paid throughout the time the bond is held, and an “inflation” rate that is indexed to inflation. Rates are changed in May and November. Bonds must be held five years to redeem without penalty but can be held for much longer, and tax deferred until they are redeemed.
Currently, a Series I bond bought today pays 5.64%! That’s a great rate in these difficult and low interest times. Granted, the inflation rate will fluctuate–sometimes a lot–but that can also be to your advantage, because bonds that were bought with lower inflation rates suddenly get a boost if that rate is adjusted up in May or November.
Of all of the various investments I’ve had this year (taking them as a whole–my Sharebuilder account, my 403(b), my Roth IRA, my traditional IRA, and my Treasury Direct account where the Series I bonds are the only holding), the Treasury Direct account has done the best by far.
That said, this is not a blanket endorsement–in better times, stocks will surely trounce these bond returns, and if inflation comes in at low readings, the rates paid on the bonds will be much lower. Additionally, Treasury Direct has the most inane interface of any of the many banking or financial Web sites I’ve ever used–I’ve been locked out no less than three times and finally got back on today. However, for those looking for some allocation into inflation protected bonds, this is a very decent option to look into.
[...] at Uncommon Cents had a GREAT investment in 2008. Want to know what the investment was? Click to find [...]