Any finance gurus here? I read an article dated 2012 that said EE Savings bonds are a good investment.  I noticed the rate just recently fell to .2 % from .6%, both less than 1%.  How in the world can that be a good way to save for retirement? Does the rate change if you hold it to maturity, which I think is 17 years?

I don’t understand the economics behind it, either, however, I believe Japanese government bonds fell below zero percent and were still for some weird financial reasoning being purchased by large investors.

Occam

I’m not even sure if this is the case, but if a government devalues its currency, possibly bond holders get the original value rather than the devalued amount.  For example if one bought a $1000 bond at -1% interest and kept it for one year it would be worth $990.  However, if during that year, the government devalued their currency by, say, 50% a person who had $1,000 in his wallet would still have the same amount, but it could buy only half as much.  Possibly if the bond holder cashed in his bond at the end of the year, he’d get in actual currency, $1,980. 

Occam

Occam. - 27 November 2012 12:00 PM

I don’t understand the economics behind it, either, however, I believe Japanese government bonds fell below zero percent and were still for some weird financial reasoning being purchased by large investors.

Depends what the alternatives are. I assume people buying those bonds think that alternatives will do worse.

It’s true you can keep money in the mattress, but that has its own risks, which can be catastrophic.

Can’t do much worse than .2%. Even kiddie savings accounts have higher percents.  That’s why I was wondering if there’s something I’m missing about ee savings bonds that make even a measely .2% not enough to stop buying bonds.  It’s almost as if the US Gov is saying STOP buying savings bonds.

I was thinking that one could buy gold or diamonds, but then, how do we know if possibly their monetary value may plummet.  If all the stocks drop to, say, 10% of their value, and banks default on everything above the government guarrantee, maybe having only a .2% loss would be a good investment.

Occam