It’s always a good idea to look at multiple resources and speak to several financial experts before putting your money into an investment product. Irrespective of what you invest in, no product will guarantee an investment in the long run. Your capital is always at risk, so you must ensure you are willing to invest money that you could potentially lose.
Regarding savings bonds, there are plenty of positives to consider. If your money sits in a bank account, it will slowly lose value because of inflation-based asset depreciation, especially in today’s frosty economic climate. Even if you look to put it in a savings account, recent news has shown us that even the best high-street banks offer savings accounts with a rate of interest that doesn’t keep up with the inflation rate.
Suppose you’re looking for a product designed to stay ahead of inflation and insulate you from the negative impact of deflation – in that case, savings bonds are one of the best options that millions of Americans have invested in.
Savings bonds defined
Other positive factors regarding savings bonds are that they are easy to understand and you can purchase them directly from the Treasury’s website.
A savings bond is when you place your money into this investment product and the government pays you back marginal interest annually. Essentially, you are lending your money to the government so that it can invest it in the economic infrastructure and pay you back at a reasonable rate of return.
You can take out two different types of savings bonds from the Treasury – a Series EE bond or a Series I bond. There isn’t much of a difference between the two.
However, the most significant difference is that if you hold on to an EE bond for 20 years, you are guaranteed to double your initial investment if you do not draw on it before the end of its lifespan. A Series I bond has no such guarantee but is designed to factor in inflation, so this would be a wise investment in the current economic climate.
Should I invest only in savings bonds?
That is a question you must ask yourself; no two people have identical portfolios or risk appetites. People get into investments for all sorts of reasons. Some investors will have invested in the same savings bonds for completely different reasons.
Many professional investors and analysts will wax lyrical about the importance of having a diverse portfolio of assets. However, for a beginner, you must shop around for your best investment opportunity.
It would be best if you didn’t base your decision on just a few hours of online research. Once you understand the product you are investing in and the current economic conditions that underpin the value of that investment, you are in a much better position to make your choice.
If you compare savings bonds with other products in terms of their risk, it comes across as an attractive investment. However, savings bonds are a long-term prospect, and if you draw on them within the first five years, you will receive a penalty and forfeit the accrued interest.
As we have already discussed, every investment comes with a risk – it’s just that some are riskier than others. For example, investing in stocks or commodities like oil and electricity requires understanding what drives the market. If you do not understand the product, you are essentially gambling. Savings bonds are no different, even though they carry less risk.
Conclusion
If you’re a beginner, seeking out the help of an expert and speaking to friends and family about your potential savings bonds investment is something we would highly recommend. Getting a range of opinions is wise before deciding what product is best for you.
For instance, many people lost an incredible amount of money in 2022 during the various collapses of the cryptocurrency market. However, those investors who knew what they were doing and bought at the bottom have since made ample profit, as digital assets have soared again in popularity.
Likewise, those who looked at the news about Credit Suisse and pieced together that there would be a bailout would have made a handsome return, following the announcement of their bailout and subsequent share price increase.
These are just a couple of examples and although these investments can pay off, they are very risky and can just as easily go the other way. Knowing your market and what moves it is the key to an investment strategy that works, and that only comes with plenty of time and practice.