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Tuesday, June 13th, 2006
Categorized as: Savings Bond news
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I have some EE bonds most are 1988 and some are 1989 1 2000 I was thinking that the 1988's would be matured at 12 years after issue not correct? I didn't see the dates on those. Should I do something else with these
Faye - 12 years? Yes. Do something else? No.
Tom Adams
Here's a nice observation that appeared today on the Bogleheads page that reinforces some of Tom's succinct philosophy on comparing the stock market to inflation over finite time spans:
$100,000 invested in the stock market in 1961, including reinvested dividends, but corrected for inflation, would have grown to $100,960 in 1975 (14 years) or $129,500 in 1976 (15 years).
And of course, $100,000 invested in the stock market in 1928, including reinvested dividends, but corrected for inflation, would have "grown" to $91,300 in 14 years, $111,400 in 15 years, $135,000 in 20 years.
I just finished reading the book "Saving Bonds Advisor". Excellent book however, I was left with some questions that were not adressed or fully explained. First, is it financially practical or even responsible of me to have the majority (70-100%) of my investments in U.S. Gov't Securities?
Also, would my investments bring greater returns if I had U.S. Gov't Securities mutual fund accounts instead of bonds purchase from Treasury Direct?
Finally, if U.S. Saving Bonds are so great, than why are all the financial planners telling everyone to purchase municipal bonds—they seem to have security, tax benefits, and higher yields than U.S. bonds?
Lawrence - The book suggests having the foundation of your investing portfolio in safe liquid investments. How much that is in per cent depends on how big your portfolio is. So if you have a $10,000 portfolio, yes, it should ALL be in safe investments. If you have $10 million, on the other hand, it would not be responsible to have it all invested in government securities.
You get the best returns by using TreasuryDirect, not a mutual fund.
I don't have anything against municipal bonds. Given the annual investment limits for Savings Bonds (lowered to $5,000 per SSN per year since the book was published), they are definitely worth considering, although there are some concerns that the current financial crisis will end up causing some of these bonds to default.
Tom Adams
Thank you for responding so quickly to my questions. I really don't trust the stock market. I have been trying to force myself to invest in the market because EVERYBODY is telling me that's where my money should be. I'm 34 yrs. old and I am told that I have plenty of time to recover any loses from the downward market trends. The problem is: I don't want to lose any of my money and I don't like the idea of not knowing what my investment is worth on any given day. HOWEVER, your response to my earlier question has disturbed me even more. You stated, "…the current financial crisis will end up causing some of these bonds to default." IF the U.S. were to default on its financial obligations, where would that place small investors like myself and should I continue to purchase Savings Bonds? Also, how would this effect world markets, considering the U.S. dollar is the global standard? It is my understanding that nations cannot discharge sovereign debt in bankruptcy, is that true?
Lawrence - please go back and read your previous question.
You asked me about municipal bonds. I responded that some municipal bonds are likely to default because of the current financial crisis. Municipal bonds are issued by cities, not by the U.S. Treasury.
It's generally believed that the U.S. Treasury can't default because it can print new money to pay its debts. That may cause other problems, but not default of its obligations.
Tom Adams
If an I Bond is issued in my name but shows a different Social Security Number, Can I cash it or does the person who's SS# appears on the bond have to cash it? Who would be responsable for the tax?
Robert - the SSN on the bond isn't used for anything but tracking the bond down if it's lost. See this post for the answer to your tax question.
Tom Adams