A case can be made for the addition of Series I savings bonds to both fixed income and equity strategies. Series I savings bonds are issued electronically and no longer issued in paper form. Series I savings bonds offer a way to stay on the sidelines during anticipated stock market downturns and rising interest rates. As soon as one year after conditions have improved, investors can cash out their Series I bonds. At that time, you can reinvest the cash towards better yielding corporate or municipal bond issues as well as equities and other opportunities. In the meantime, your bonds will earn a better rate than in a money market. At this time, annual rates are equivalent to 5-year treasury bonds provided you hold them for at least 5 years. If you cash out prior to 5 years but after 1 year, you forfeit the previous 3-months worth of interest. The downside to Series I bonds is the one year holding period. So, investors should bear in mind that since Series I bonds are not as liquid as a money market, they are not intended for storing emergency funds. They are also not intended for purchases of more than $10,000 per year of their investible assets.
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