anoop <ghanwani@[EMAIL PROTECTED]
> writes:
> If you are certain you won't need the money for 5 years,
> you can look at buying I-bonds. The rate right now is
> not that great, but is probably better than CDs. As an
Only because inflation has kicked up for the moment.
US Treasury Series I bonds are paying the lowest fixed-rate
since they were introduced. Since the first of this month,
the fixed rate ****tion of I-bond interest is now ZERO percent.
The current overall earnings rate is an annualized 4.84% -
a combination of the ZERO fixed rate and the inflation
rate as measured by the CPI-U.
Six months from now, that inflation ****tion may go down,
but any I bonds purchased now will keep their zero fixed
rate.
By comparison, when they were first introduced, the fixed
****tion started at about 3%. Folks who bought them anytime
from '98 to 2000 are earning as much as 8+% now, given the
currently high inflation and fixed rate ****tions of 3.3 to
3.6%.
I'm not sure I'd want to lock in that zero percent fixed
rate, even with the (tem****ary) nominal 4.84% rate. If
one does want that inflation protection, it may be worth
putting the I-bonds off until November (or later) when
(hopefully) the gov't will give a more generous fixed rate.
In the meantime, the money may be parked in 6-month CDs
or in funds invested in short-term bonds.
Here's the info on historical rates on the I-bonds:
<http://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm>
In fact, in general, in response to the OP's original
question, a short or short-mid term investment grade bond
fund might be just what he's looking for anyway.
By way of example, the Vanguard short-term investment grade
bond fund is currently yielding 4.87%, is rated 5 stars by
MStar, and hasn't had a negative year in at least 10 years,
has only had two negative quarters in that time, and has had
a 10 year annualized total return of nearly 5%. (in '94,
it actually had a total return of -0.08%, the only down year
since it started, and that was sandwiched between two years
of +12.74% and +7.07%). That fund is VFSTX.
For a taxable account, there are very similarly good short
to mid term muni bond fund worth looking at, too, especially
for folks in high tax brackets and in high tax states.
These will all likely do better than CDs or I bonds, at
least over periods of more than a couple of years, with vastly
less risk than even the most conservative equity funds.
If anyone out there was lucky/smart enough to load up on
I-bonds in 98-00, hang on to those! I bought some and wish
I'd bought a lot more. Of course, it was very hard to
convince people to buy such conservative things during that
particular period of time, give what was happening in certain
very well advertised parts of the stock market...
--
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No HTML in E-Mail! -- http://www.expita.com/nomime.html
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