Savings bonds qualify as one of the most popular investment classes in U.S. history—but does that mean they belong in your portfolio?
As ever, we can’t make a blanket statement or give a definitive yes or no. All investors have different needs and different goals, and your portfolio should be structured accordingly. That’s why it is important to meet with a financial advisor who will really get to know you and develop an investment strategy that’s tailored to you and your financial ambitions.
What we can say is that bonds, though generally considered to be quite a conservative asset type, do offer some noteworthy benefits, ranging from tax advantages to full backing from the United States government. At the very least, make sure you understand the merits of U.S. savings bonds before ruling them out of your portfolio.
The Benefits of U.S. Savings Bonds
Some significant advantages offered by U.S. savings bonds include:
They are backed by the full faith and credit of the U.S. government, and guaranteed to never lose value. That’s not necessarily a sure thing, but it’s about as close to it as you’ll get in the world of investment.
Lost savings bonds can be replaced or reissued for almost no cost.
Though it depends on the type of bonds you invest in, you may receive protection against inflation or a guaranteed fixed interest rate, which means you’ll know the minimum return you’ll get over a period of so many years.
U.S. savings bonds come with certain tax advantages, including the possibility that you will pay no taxes on the investment income generated as the bonds earn interest, if you use the bonds to pay for college tuition or other qualified expenses. (Ask your financial advisor about this!)
Bonds are quite affordable—some are priced at less than $20—which makes them ideal for brand new investors.
Generally, there are no fees or commissions assigned to savings bonds.
To be fair, there are some downsides to investing in bonds. If you don’t use the funds for educational purposes, bond yields can be subject to taxation. There are also maximum annual purchase amounts set for different types of bonds.
Yet clearly, there are some compelling reasons to consider U.S. savings bonds, and to spend some time discussing them with your advisor. Do that today: Contact Stonepath Wealth Management and schedule a consultation!