series i bond i bonds

Round Out Your Portfolio with this Nearly-Riskless Investment

By 1securemf | Safer Smarter Crypto | 15 Sep 2022

Never Invest in Just One Asset Class

Crypto may be the future of financials, but nobody knows exactly when the future is going to happen. 

What we do know is that citizens of the USA currently pay their bills almost exclusively in USD.

We also know that the value of the dollar is being demolished by inflation.

However, there's an esoteric financial instrument that was designed for disastrous times such as these: I-Bonds.

I bonds

Series I Bonds

Introduced in 1998, this press release from the US Treasury claims that I-Bonds were designed "to offer all Americans a way to save that protects the purchasing power of their investment while assuring them a real rate of return over and above inflation."

Currently, I-Bonds can only be purchased by American citizens who sign up for a free account with TreasuryDirect.Gov

from the US Treasury. I-Bonds are considered as low-risk an investment as they come, and I bonds purchased before November will endow investors with a (wait for it...) 9.62% yield.


Gains on I bonds are not subject to state or local taxes. If spent on qualified education expenses, gains on I bonds (for investors below a certain income threshold) can even be exempt from federal taxation.

So... what's the catch?

There are a few catches, but (in my opinion) they're quite minor.

Firstly, the 9.62% yield is only fixed for 6 months after purchase. The interest rate is based on inflation (official Consumer Price Index figures) and therefore the yield on I Bonds will change as inflation decreases. However, the interest rate on I bonds can never fall below zero and the dollar value of your I bonds is guaranteed to increase. Unless the United States treasury perishes, there is no chance investors will suffer any loss of principal.  

Secondly, I bonds are completely illiquid for one year and if you cash in your I bonds after owning them for less than 5 years, you'll forfeit the last three months of interest earned.

Lastly, I bonds have a $10,000 annual purchase limit per individual.

The Bottom Line

In my opinion, I bonds are a complete no-brainer for most every investor. Yes, I bonds are very different from DeFi -- they're about as centralized an asset as they come -- but as long as we're living in a world in which most bills have to be paid in USD, I bonds belong in virtually any well-diversified portfolio. 


Disclaimer: I am not a licensed financial advisor. These are my personal opinions and are not to be mistaken for investment advice.


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1SecureMF is a published journalist (Rolling Stone), hedge fund analyst, and individual investor who's been featured on the Economist podcast.

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