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Bonds

I Savings Bonds For Profitable Savings

Investors looking to make a sizable return on their investments often turn to funds or other services which require them to take a certain amount of risk in order to achieve big gains. Stocks, certain types of bonds, and other schemes can yield big returns and help customers increase wealth.

They are also full or risk. So, how can you make a profitable savings without risking it all? I Bonds is the answer; the government issued and government backed savings bonds brought to you by the U.S. Treasury department. Read on and we'll take a look at this important investment vehicle.

Advantages:

I Savings Bonds are backed by the U.S. government just like certificates of deposit accounts, checking accounts and the like.

I Savings Bonds protect your investment against inflation risk as rates are indexed to pay above inflation costs.

I Savings Bonds are sold in a variety of denominations, starting at $50 and up to $10,000. Customers pay the face value of I Bonds and redeem the bonds plus interest at a later date. Interest is added to the bond monthly and is paid when you cash in the bond.

I Savings Bonds can be bought from most banking institutions or directly from the U.S. Treasury.

I Savings Bonds earnings are exempt from state and local taxes, and can be tax-free if used for post-secondary education expenses.

I Savings Bonds taxes on earnings can be deferred for up to 30 years.

I Savings Bonds pay well and the interest rate is adjusted twice annually to reflect changes in the inflation rate.

Disadvantages:

You must hold onto I Savings Bonds for a minimum of one year before cashing the bond in. If you cash an I Bond in before its fifth anniversary date, you will be charged a three month penalty on interest.

Although rates for an I Savings Bond is typically competitive, you may do better investing your funds with a bank's certificate of deposit account to achieve the highest yield available while minimizing risk.

If you are still interested in purchasing savings bonds, then an EE savings bond may be a better choice for you. EE savings bonds pay a fixed rate of return for the life of the bond, however rates for these savings bonds are still below the rate customers can get with a five year certificate of deposit account.