Bond Investing Tips

Savings Bonds are excellent choices for low-risk short term and long term investing. They are guaranteed by the U.S. Government and can be replaced if damaged, lost, or stolen. The value of savings bonds will never go down, they offer tax advantages, and have interest rates that are guaranteed to be higher than current inflation rates.

Residents or legal citizens of the United States that have a valid social security number can own U.S. savings bonds. Savings bonds may also be purchased for children who don’t yet have a social security number by using the purchaser’s own social security number.

EE Savings Bonds are low-risk savings bonds that pay interest based on a fixed rate, with interest being added to the value of the bond periodically. An EE Bond’s purchase price is half of its face value. A $200 bond would cost you $100. EE Bonds are considered a safe investment and can be purchased at a local banks, credit unions, other financial institutions, through employer’s payroll deduction, if available, and from Treasury Direct, the U.S. Department of Treasury’s financial service website.

I Savings Bonds earn interest while protecting the owner from inflation. I Bonds are sold at face value. A $100 bond would cost you $100. I Bonds are an accrual type security which increases in value monthly and will continue to earn interest for 30 years from the date of purchase. Interest is calculated monthly and compounded semi-annually. I Bonds are considered a low risk, liquid savings bonds that can be purchased from most financial institutions, through payroll deduction, or from Treasury Direct.

Treasury Inflation-Protected Securities, or TIPS, offer protection against inflation. The principal of TIPS decreases with deflation and increases with inflation determined by changes in the Consumer Price Index. TIPS pay interest at a fixed rate two times per year. When a TIPS matures, you are paid the original principal or adjusted principal, whichever is greater.

Treasury notes are issued in terms of 2, 3, 5, and 10 years and offered in multiples of $1000. T-notes pay interest every six months until they mature.

Treasury bills are issued at a discount from their face value. When T- bills mature, you are paid its face value amount.



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