I-Bonds 

There is a way that someone can gain money on an investment yet end up with less money after the profit has been returned to them.

This phenomenon is made possible by inflation.

If the money that is invested or saved does not increase faster than inflation you will lose money even if you make money on your investment.

Who has not heard the complaint about gas prices? I have even found myself saying, “I remember when I was in school gas cost X dollars a gallon.”

However, the house that I have had in my family for 20 years was just reappraised and is now worth $1,000’s more now than it was then. The truth is our house did not increase in value because we were real estate geniuses.

Our house increased with the rate of inflation. The same thing I complained about with the gas prices I celebrated in real estate. First, we must understand that inflation can work for us or against us. Secondly, we must understand how to make inflation work for us so we can decrease the time for us to reach our goal of financial freedom. 

In the bond world there is a government issued long term investment that is known as the I-Bond. The I-Bond or inflation bond increases at the same rate of inflation. What this means is if you invested enough money in an I-Bond in the 1950’s to buy a soda, today you would have enough money in that bond to buy the same soda (ruling out all outside factors like product demand etc). The United States Government guarantees your return of this investment so the only way you would not get your money is if our government collapsed. In that case getting our money out of an I-Bond would be the least of all our problems. To set up an account takes about 5 minutes and with your account you can set up automated bond purchases on the dates that you determine. I like the automated system because it takes the thought out of saving. This is good so you will not use your investment money as movie money (I know this part does not apply to you). 

With the up must comes the down, the ying brings the yang and with every good there are some bad, however, in this case the bad is more a matter of does this strategy work best for me and my financial goals? Bonds work best for the longtime investor who is looking for a safe return or who for the novice who is wanting to begin but really does not know where to start. If or when you decide to purchase the I-Bond, that money cannot be touched for one year. After the bond’s 1st birthday is celebrated the bond can be redeemed but with a 3 month loss of interest penalty. When you celebrate your I-Bond’s 30th birthday party you can redeem the bond without the 3 month penalty. 

As always what you do with your money is your choice. On this site I am sharing with you principles and companies that have been beneficial to me. You are responsible for your own research and our own choices, therefore, choose wisely. To learn more about I-Bonds go to www.treasurydirect.gov 

Investing Strategy #2 

I often hear people complain about gas prices and how inflation (increase in the cost of living) is making it hard for them to get by. This week I wrote about a bond that uses the inflation rates to make you money. If you want to learn more go to www.stevenroddy.com and then click on Money Management. 

Moving Forward, 

Steven Roddy II 

Quote of Week: Why not go out on a limb? Isn’t that where the fruit is?

~ Frank Scully