Is there any downside/risk to Series I bonds that I’m missing? I meant to buy these a few months ago when they were at 7 percent and forgot about them, and now see that they are at 9.6 percent and was about to pull the trigger.
Can’t cash them for a year. If you hold less than 5, you lose 3 months interest. If inflation drops back to being low, the interest rate will also drop.
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Yeah I saw that, but hell, even if I cashed out after a year, 9 months of 9.6 percent interest followed by 3 months of zero interest is still a lot better than anything else I’ve got my money in right now.
They are taking the money and making leveraged investments in shitcoins. How else could they guarantee 9.62%?
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I see no downsides other than what Jonny posted. And interest is tax free if used for higher education, which most people don’t ever mention. So it’s an option as part of saving for your kids college.
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They can just print more money
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Can’t buy more than 10k a year, can’t sell it. Also that interest rate changes every 6 months with the cpi, it’s not 9.6% forever. So yeah it’ll keep 10k a year returning the rate of inflation risk free.
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So I just inherited a sizable sum of money. Should I:
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- Purchase a $10k ibond and put the rest in a high yield savings account/cd (which is still less than 2 percent right now)
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- Purchase a $10k ibond and put the rest in an S&P 500 tracking low fee index fund (like VOO).
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- Purchase a $10k ibond and put the rest into bitcoin.
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- Purchase a $10k ibond and put the rest into scamecoins.
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- Purchase a whole lot of apes.
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Follow-up question. Assuming I do the index fund and not the apes, is there a downside to using Robinhood and just buying VOO shares? I already have a Robinhood account so it would be more convenience than anything else. All my other “investments” are through deferred comp.
Unless you’re eligible for some sort of (Roth) IRA or other tax advantaged account (HSA, maybe, if you haven’t already been maxing it out?) to put the money in, I don’t think there’s much difference between buying and holding in Robinhood vs. any other brokerage account, but I’d be curious if someone has a better answer than that.
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I would be worried about Robinhood going bust. Your money would probably be fine but it would be a pain. I’d use Schwab, Vanguard or Fidelity.
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Exactly what I was about to post.
Yeah, that was the only thing in the back of my mind, the inconvenience of robinhood going busto. Do the other brokers not charge fees as well?
I’m pretty sure that you pay fees on Robinhood, just not the standard fee that other brokerages charge. Robinhood sells your trading order to be executed, which almost always results in you getting a worse execution price. My understanding is that this may be good if you’re doing small trades of liquid stocks but can screw you for large trades - as the $5-10 fee you’re avoiding is less than the cost of the bad execution price you’re getting.
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Ally and E*trade both have low cost stuff
Sounds like you’re not planning on trading a bunch so it doesn’t really matter
True, I’m just giong to buy and hodl. It was more the inconvenience of opening a new account somewhere else but I guess it’s worth doing.
What has been your approach to college savings for a child? I have a two month old and happened to be flush with cash atm because I was saving a down payment for a house then decided to step back from the market. Since I have the benefit of time on my side, the excess cash, and a bear market, I want to put some away into the market.
I’m going to buy $10k i bonds as a first step and plan to keep that money parked while rates are high. Then I’m going to do a little more research on 529s. I looked into my state’s offering and it has both an option for prepaid tuition and an option to invest the money some market funds with tax free growth. My intuition is saying “go for the investment” but that could be wrong. It has some decent options though the fees seem a little high compared to just a standard index fund. I’ll have to do a little math but I’m assuming those fees will end up being quite a bit less than taxes if I were to hold in a brokerage account for the next 18 years.
Anything else I should consider? This is all literally infinite more than my parents did for me, so I’m just thankful to be in a position where I can at least put something away now.
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529s are good. If you have a lot of cash you can frontload 5 years of max contributions (around $75k) all at once.
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I did the 529 and went with the index funds. Prepaid tuition seems bad unless you live in state with good colleges, don’t plan to move, and can force your kid to attend an instate college.
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I have two kids and put 10k in total in a 529 each year. That’s the annual limit for contributions to be tax deductible at the state level in New York. Will make up the rest with I Bonds, general savings, etc.
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