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Ask HN: Have you bought I bonds yet? Why not?

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Re: Ask HN: Have you bought I bonds yet? Why not?

#41

Post by lotsofpulp »

BbzzbB wrote: post #27
bombcar wrote: post #11

Earlier quoted context omitted.

You can double that and more if you're married, and use the tax refund trick. But the reality is that 10% on 10k isn't a terribly large amount of money at the end of the day.

You're gonna invest that 10k somewhere in all likelihood, a risk free 10% is pretty much unbeatable, it's higher than most high-yielding (and vice) stocks, but without bearing the risk of capital loss. Seems silly to me not to use I-bonds even if the cap is relatively low, sure wish I could (not American).

As other comments have indicated, the time and effort to actually invest the $10k in ibonds is considerable given the difficulty of using the website. I also want my cash to be accessible within a few days, so I prefer FDIC insured savings accounts. For locking up money for months or a year in an ibond, the annual gain compared to a savings accounts is only a maximum of $700 or so.

The rest I invest in equities, which assuming the US has a functioning society in 5, 10, or 20+ years, will be worth far more.

Re: Ask HN: Have you bought I bonds yet? Why not?

#42

Post by medvezhenok »

dragontamer wrote: post #28
adabyron wrote: post #25

Things I wish I knew earlier. When you buy them, you lock in the current rate for 6 months from the date you purchase & then you get the next rate for 6 months after that. So today you get 9.62% for 6 months, so you'll technically earn 4.81% interest on your money after 6 months from the date of purchase. You'll then get the next rate which is most likely 3% for 6 months (often quoted as 6% annually). This site does…

> You'll then get the next rate which is most likely 3% for 6 months Which is less than the 3.9% you get from a 6M treasury right now. If i-bonds really only get 6% in the next rate, you've lost money compared to 6M or 1Y treasury bonds.

The 3.9% you get from a 6M treasury is annualized (so only 1.95% in 6 months), and the 3% for 6 months (from I-bonds) is actually >6% annualized.

So I-bonds will still beat the 6M treasury bond unless the rates on the latter keep going up.

Re: Ask HN: Have you bought I bonds yet? Why not?

#43

Post by ceejayoz »

freediver wrote: post #8

The cap of $10,000 makes it not very interesting from an investment standpoint. And while the yield is great on paper, it merely lets you keep up with inflation in practice. There are probably better ways to use $10,000 if that is all you have and you are interested in growing money - online courses come to mind.

Its pretty great from an emergency fund standpoint, though. $30k/couple/year if you buy the extra $5k/person with tax return. After a few years you've got a nice inflation-protected emergency fund you can draw on reasonably quickly in the case of something like a job loss.

Re: Ask HN: Have you bought I bonds yet? Why not?

#44

Post by thrtythreeforty »

timr wrote: post #34
adabyron wrote: post #25

Things I wish I knew earlier. When you buy them, you lock in the current rate for 6 months from the date you purchase & then you get the next rate for 6 months after that. So today you get 9.62% for 6 months, so you'll technically earn 4.81% interest on your money after 6 months from the date of purchase. You'll then get the next rate which is most likely 3% for 6 months (often quoted as 6% annually). This site does…

Yes, I-bonds are a bit of a meme right now, and IMO, overhyped. The other important things to note are that your money is locked for a year from purchase , you incur a penalty (3 months of interest) if you sell before 5 years, and the APY values being quoted are not indexed to inflation. I-bonds issued today yield essentially zero percent after inflation, and this will be true for as long as you hold them. Do not buy…

I-bonds are also a great option if your alternative is holding nothing but cash. This isn't really advisable, but I know people that do, largely due to fear of a decline in value. A guaranteed number-go-up product, even if all it does is tread water in real dollars, is a lot better than a product (bank account) that loses real value every year.

For those people, I heartily recommend I-bonds.

Re: Ask HN: Have you bought I bonds yet? Why not?

#45

Post by cjmb »

mgkimsal wrote: post #32
adabyron wrote: post #25

Things I wish I knew earlier. When you buy them, you lock in the current rate for 6 months from the date you purchase & then you get the next rate for 6 months after that. So today you get 9.62% for 6 months, so you'll technically earn 4.81% interest on your money after 6 months from the date of purchase. You'll then get the next rate which is most likely 3% for 6 months (often quoted as 6% annually). This site does…

> So today you get 9.62% for 6 months, so you'll technically earn 4.81% interest on your money after 6 months from the date of purchase. That doesn't seem correct. If I have $10k, and it earns an annual rate of 5%, for 6 months, I would get $250. That's not the same as saying I'm earning a 2.5% rate. You're earning 5%, but only for 6 months. If you were earning 2.5%, for 6 months, you'd only get $125.

In the OP -

> [4.81% interest on your money after 6 months from the date of purchase]

This is a single concept. The quantity of money earned (4.81%) and the time period over which it is earned (6 months from the date of purchase) are both specified.

In your message -

> it earns an annual rate of 5%, for 6 months

You change the rate to annual here..

> You're earning 5%,

Here you leave the time period over which the 5% is earned implicit (1 year)

> If you were earning 2.5%, for 6 months, you'd only get $125.

And once again here you drop the "per year"

Conventionally, finance uses rates of return on an annual basis -- but it's not unreasonable to use another basis so long as that's specified clearly (as in the OP). This helps because the OP is trying to help people understand the dollar-magnitude of returns they are locking in (X% per year, but for half the time -- aka half the sticker price return) and what is variable in the future.

Re: Ask HN: Have you bought I bonds yet? Why not?

#48

Post by Lonestar1440 »

It just doesn't seem worth the hassle given the unique account with weird sign-up process, low maximum investment, and lock up period.

Like it's a theoretically optimal way to invest $10k that won't be needed in the short term, but it's also just a few hundred dollars more than I get from a money market account which has far fewer restrictions. Plus another account to deal with.

If I could add it to a portfolio in an existing investment account, I'd do it.

Re: Ask HN: Have you bought I bonds yet? Why not?

#49

Post by dragontamer »

medvezhenok wrote: post #42
dragontamer wrote: post #28

Earlier quoted context omitted.

> You'll then get the next rate which is most likely 3% for 6 months Which is less than the 3.9% you get from a 6M treasury right now. If i-bonds really only get 6% in the next rate, you've lost money compared to 6M or 1Y treasury bonds.

The 3.9% you get from a 6M treasury is annualized (so only 1.95% in 6 months), and the 3% for 6 months (from I-bonds) is actually >6% annualized. So I-bonds will still beat the 6M treasury bond unless the rates on the latter keep going up.

Uggh, its always annoying trying to compare apples to apples.

Thanks for annualizing (or in this case, 6Month-izing) the rates for an actual apples-to-apples comparison.

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