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I'm wanting,to start investing later this month. Can someone please tell me how savings bonds wo

Author :

Submitted : 2018-06-15 00:19:47    Popularity:     

Tags: investing  start  wanting  month  work  

Update: I'm wanting to start investing later this month. Can someone please tell me how savings bonds work? The info I found online is confusing.

Answers:

A $100 savings bond will be worth $200 in 30 years. Ask your bank for an instruction.
<And it aint worth it these days>.

How much will a $50 savings bond be worth in 30 years? --- These bonds have a final maturity of 30 years from the date of issue. A Series EE issued 19 years ago is currently yielding 4 percent and has a yield over its lifetime of about 5.26 percent. The bond is worth approximately $67.06, with $25 in principal and $42.06 in interest earnings.

Check value of savings bond online - Bankrate.com
https://www.bankrate.com/banking/savings...

any bond =
in effect a piece of paper saying "I will buy this piece of paper back in Y years for $X - Between now and when I buy it back I will pay you $Z every year"

When you buy the bond you are trusting that the organisation issuing it will pay you back the $X in Y years and pay you the $Z each year

since most bonds are issued by the government then no problem (but companies also sell bonds - Even if Y and $X are the same their "$Z" will be higher than with government bonds cos of the additional risk that the company could go bust)

The KEY things are

1) they do NOT pay "interest" - once you bought a specific bond the amount you will get from it each year ($Z) will NOT change (an organisation can issue many different types of bond- with different Y, $X and $Z)

this is NOT like money in a savings account where the interest you get from the money will go up and down as interest rates go up/down

2) the amount you have to pay to buy the bond is NOT fixed - THAT depends on the market price at the time you buy it

3) If/when you sell the bond the amount you get will ALSO depend on the market price at the time you sell

So its possible you will pay more for the bond then you get when you sell -
That is- you will make a loss
This is NOT the same as putting money in a savings account - you put 100$ in then you get 100$ out

4) If you dont sell and let the bond "expire" (you get to year Y) then the bond issuer will give you the $X in exchange for the "piece of paper" (it aint actually a "piece of paper" - its done electronically - you get the $X credited to your account and the bond gets deleted)

5) - this is where it gets a bit tricky
The effective "interest rate" you get on the bond depends on the price you paid for it and the amount it pays each year "$Z"
Since $Z is fixed then the more you pay for it the less the "interest rate" and vice versa - the less you pay for it the more the "interest rate"

That is- the "interest rate" moves in the opposite direction to the cost
OR the cost moves in the opposite direction to the interest -
the lower the interest the higher the cost and vice versa
Since the cost of a bond is constantly changing this is not the same as savings account - you put 100$ in you know the interest you get on that will be the same as all your other money in that account - And you know that unless the bank interest rate changes you can put it in next month and STILL get the same interest

THIS is important cos bonds "interest rate" compete with bank interest rates
At THIS moment US bank interest (and worldwide) rates are historically low
THIS means that bond costs are relatively high
If US bank interest rates go up then most likely the cost of buying bonds will go down
(I could well be wrong but I think US rates will go up over the next few years)
and THIS means the cost of any bonds you buy now will come down - and you will lose money as a result (but ONLY if you sell)

I know all this may appear a bit confusing but give it a think (The key thing is - if you grasp what a bond is- then it should get a lot clearer)

My advice - Bonds are really for people who want a fixed known income and not an "investment" for any individual
Dont know your age but my advice nearly always is- set up a savings plan investing in mutual funds every month (preferably at least 3 different ones)
AND these funds should be "index" (sometimes called "tracker") funds
(if you really MUST stick with "bonds" then there are mutual funds that specialise in bonds)
Remember -
1) these funds specialise in different areas of the market, and the "market" is global (its a lot more than just the US), so if you are interested then have a look at at several (all if possible) and pick the ones you want to invest in

2) "investing" is a long term thing- 5 years AT LEAST

3) invest an amount you wont miss each month so you can forget about it - ONLY look into it is there are LARGE changes in the market. cos ALL markets recover eventually - the only thing that changes is how long it can take

Savings Bonds are poor investments. They barely keep up with the cost of inflation and then your profits are taxed. You should go to Morningstar Funds and study their funds. (Morningstar does not sell Mutual Funds.)

It pays you a very small amount of interest at its due day, commonly at least one year or longer. Go to bank to buy saving bond issued by government.

Really simple. You loan the Federal government money and let them borrow it for however many years the savings bond is for (e.g. 10 years). In return the Federal government will pay you a small amount of money every few months (interest payments). That amount of money is the interest rate (e.g. 2% per year) multiplied by the amount of money you loaned them. At the end of the loan, the Federal government will hand you back the original amount of money you gave them.

If you decide you want your money back before the end of the loan, you can request it be returned. In this case the Federal government will hand you back the original amount of money you gave them, but they will keep the interest accumulated on the loan that has not yet been paid to you.

Savings Bonds are among the simplest, and most easily accessible investments. Basically, a savings bond is a certificate of debt from the United States Government in which the debtor is the government itself. As the investor, you essentially act as a money lender to the government. In exchange for your loan, the government agrees to pay back your loan plus interest. The major difference between a savings bond and a regular secured loan is that instead of the government giving collateral to secure the loan, the security comes from the full faith and weight of the government.

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