Tuesday, April 29, 2008

Preparing for an extended recession with I Bonds

***Ethical Grifter Note: The fixed interest part of these bonds will change May 1, 2008....if you are planning on buying, do so tomorrow! The Fed's interest rate cuts are sure to lower the interest rates on these bonds!***

Well, I finally got back into the US bond market today due to concerns about my portfolio in the next year or so and the lackluster savings account rates that I'm currently getting due to the Fed cutting interest rates. I've been searching for a stable place to put my money and still get a decent return rate and after reading numerous articles I think I bonds are the way to go. Funny thing is, over the weekend I visited my father and brought it up. It seems that he's doing the same approach, guess the apple doesn't fall far from the tree.

Why the I bond? Well this article at mymoneyblog.com sparked my interest. It sounded like exactly what I was looking for, a stable, medium-term investment with a decent interest rate. I signed up at treasurydirect.com to purchase some, but unfortunately they needed me to validate further and in order to make the interest rate deadline I couldn't mess with that. Luckily, mymoneyblog followed up with this article describing how to buy them at most banks.

What interests me most about the bonds is:

1. You are set with the fixed interest rate (currently 1.2%, but most likely going to drop further on May 1.)
2. You receive a variable interest rate on top of that which adjusts with inflation. The more inflation (including gas and food prices...and those are getting out of control), the more interest it earns.

It was as easy as stopping into my local bank (which I do not have an account with), asking if they sold the bonds, and filling out the form and turning over the cash (make sure you pay in cash to avoid any chance of bank fees). I received a date stamped copy of the form I filled out which assures me of getting the fixed rate that is currently offered and the bonds should be coming in the mail in the next three weeks.

Sounds like a pretty good place to stash some cash to me. Currently the fixed+variable interest rate is earning a total of 4.28%....spanking my ING and HSBC savings accounts.