How I Bonds Can Protect Your Portfolio from Inflation
As inflation drives prices of everyday goods painfully higher, what can you do to defend your money? One lesser-known type of investment might help safeguard your cash – but before you buy in, make sure you understand its strengths and weaknesses.
I Bonds are inflation-protected savings bonds, issued and guaranteed by the United States Treasury to protect your money from losing value to inflation. They earn a monthly interest rate that's usually close to or higher than the Consumer Price Index (CPI), one of the most popular measures of inflation. The interest rate paid by I Bonds comprises two components: a fixed rate set when the bond is issued, which remains the same for the 30-year life of the bond, and an inflation rate that changes twice a year, in May and November.
The CPI increased by 9.1% year over year in June 2022, the highest inflation rate in nearly 40 years. As of July 2022, the fixed rate on an I Bond is 0.00%, and the inflation rate is 9.62%, guaranteed for the first six months. That rate will rise or fall based on changes in how quickly the CPI grows.
Source Fool.com
