Discussing last week's market performance and the pros and cons of investing in I-Bonds
December 6, 2021
Welcome to Wealth Enhancement & Preservation’s Market Minute, where we get to update you on everything that happened in the financial markets this week. My name is Darrin Cohen, and I am the CEO of Wealth E&P.
There are two things I want to cover this week: first, a quick recap of the markets, and then second, a little bit of insight on I-Bonds.
So, all three indices were down last week. The NASDAQ was down more than 2.5%, the S&P 500 was down 1.17%, and the DOW was down the least at 0.81%. Our All-Weather score did tick down a bit, as you could expect, because of all of this. However, we are still very optimistic. Our All-Weather score has stayed in the 31 to 35 out of 40 range, after staying at 40 / 40 for a very extended period of time. The obvious concerns that are affecting the market right now are the Omicron variant of the COVID-19 virus, as well as inflation and interest rates.
Speaking of inflation and interest rates, let’s chat about I-Bonds for a bit. I’ve been receiving a lot of questions about hedging against inflation, and how we can go about that. I-Bonds were created just for that purpose. There are two portions to the interest rate on I-Bonds. There is a fixed rate, which has been 0 for a while and still is, but there is also an inflation rate. This inflation rate takes the yield up to 7.12% on an I-Bond, which is a very nice yield and is safe due to its backing by the government.
There are also a few negative things to consider if you want to invest in I-Bonds.
- You cannot invest in I-Bonds through a managed account, ETF, or mutual fund. You have to invest directly at the Treasury through www.treasurydirect.gov.
- It is a 5-year investment. You can sell it after one year, but you will incur a 3-month penalty if you sell your investment within the 5-year period.
- You can only buy $10,000 in I-Bonds per year per individual. So, if you’re a married couple, you could invest $20,000 per year.
With all of this said, I think it is a great way to get some safe yield in a rising interest rate environment. If you have any other questions on this or anything else, if you want a risk profile, or if you would like a retirement projection, please feel free to reach out or visit www.wealthep.com. Otherwise, stay tuned for our Market Minute next week!
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