Savings Bonds. Am I missing something here?

  • We are currently upgrading MFK. thanks! -neo
N

nitrofish1

Jack Dempsey
MFK Member
Jul 29, 2008
2,345
2
36
Northern Illinois
Ok so, I am 22 years old now, about to hopefully get a real job out of college, and I have a small 401k started, but now is the time to think of something to do for retirement once I start making real money.

Reading around, I get the impression that everyone in the finance market HATES savings bonds, and I may be missing something, or I just don't understand why.

They all suggest you invest 60% in stocks and 40% in bonds so that when one slumps the other is normally higher. They also say that you should have an annual investment retirement return of about 8%. WHO EVER GETS 8%?!?!?! I see mutual funds that get 30% in a fiscal year if your one of the lucky ones who happens to have all of your money in it at that time, but the 3 and 5 year outlook on those markets also makes your principal investment drop to rates of over a -20% loss. Worth it? Doesn't sound like it to me.

Stocks are up and down like crazy, I can just picture myself right now investing in stocks and when I withdraw ending up with less than I started with.

Bonds on the other hand, if left to their own devices for 20 years or so (also remember, I am 22 now, lots of time for bonds to blossom...)(about what we work for retirement), would yield more than over 100% of a return. That money can be funneled into other accounts once it quits yielding interest to return even more. Safe, guaranteed returns, am I missing something here? Because I seriously doubt that anything that an average person like me would invest in would yield over 8%.

So what's the problem with investing in something that effectively doubles my input cash without the risk of stocks or a 401k?

Thanks

Wes
 
Economy's just too shaky for some people to have faith in anything without insurance.
 
Proteus said:
Economy's just too shaky for some people to have faith in anything without insurance.
Click to expand...

But none of the other options have any insurance to them either. Look at all the people who's 401k's took a dump and are working at WalMart at age 80.

Not something I want to see myself in at that age.
 
Wiggles92 said:
Savings bonds have a cap on them now which is why most people in the financial sector hate them.

You're young and can afford to risk a little money on stocks; the rewards outweigh the risks at this point, and it's best to wait until you're older to move to safer options.
Click to expand...
If I'm not mistaken the cap is 30 years?

I'm just a little skittish to invest in stocks especially with the initial cost of online trading. I've done good in the mutual fund sector but again that's also risky business as well.
 
nitrofish1 said:
But none of the other options have any insurance to them either. Look at all the people who's 401k's took a dump and are working at WalMart at age 80.

Not something I want to see myself in at that age.
Click to expand...

Exactly, hence people not putting money into anything but their own bank savings accounts that's insured.....otherwise people would be doing what they did in the depression period, hiding the moolah behind picture frames....


My other opinion is people are trying to pay off debts now than get into anything else including investing
 
Doubling your money over a 20 year period will not counter inflation. So basically the money you invest now will not be worth anymore in 20 years because everything will cost double.
 
nitrofish1 said:
If I'm not mistaken the cap is 30 years?

I'm just a little skittish to invest in stocks especially with the initial cost of online trading. I've done good in the mutual fund sector but again that's also risky business as well.
Click to expand...

I'm not too sure on the time limit cap, but the annual purchase cap is $5,000 worth of Series EE savings bonds (can be purchased any time) & $5,000 worth of Series I savings bonds (can only be purchased with tax refund money). The problem I see is that the interest rates keep going down on the Series I savings bonds and further limits will probably be imposed on savings bonds as they keep changing stuff around, so you're better off risking it in the stock market for a little bit before giving up & attempting to play it "safe" with the savings bonds.

I would invest in viable technologies that are in their infancy now; just think about how well those who invested in Microsoft, Google, and other now-big companies at their start are doing. Sure, there's still a big risk, but you should be able to pay less for one of those stocks than you would for a so-called "blue chip" stock and potentially make a decent chunk of money if said company flourishes.

Bderick67 said:
Doubling your money over a 20 year period will not counter inflation. So basically the money you invest now will not be worth anymore in 20 years because everything will cost double.
Click to expand...

x2.

To add to that, the Treasury is trying to get people to go for online savings bonds now that cost their face value instead of the paper savings bonds that cost half of their face value!
 
Bderick67 said:
Doubling your money over a 20 year period will not counter inflation. So basically the money you invest now will not be worth anymore in 20 years because everything will cost double.
Click to expand...

Doubling however would be better than putting it in savings and hoping that I won't nibble off of it, to build interest.

I realize that inflation is running rampant in our economy. Finding that fledgling company that booms like places such as Angie's List, Craiglist, Amazon, can be tough to do. But it just seems like a safer bet even if they're changing a few things around to invest in bonds.

I was presented with a stock option with incredible buying and selling options at my previous employer that made it really worth it to buy their stock. Unfortunately with the economy the way it is, I got laid off 3 times from there and I can't imagine that their stock was doing any better at the time.
 
You must log in or register to reply here.
MonsterFishKeepers.com
Top Bottom