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FAQs

Should I hold on to bonds? ›

Though holding bonds until maturity can be moderately lucrative, you might be able to generate bigger gains by selling when their market value is high, especially if you've held the bond for several years and have benefited from its coupon payments.

Mutual funds that hold intermediate-term, investment-grade bonds could benefit from the end of interest rate increases by the Federal Reserve. Yields on high-quality bonds have risen back to around their historically normal levels.

Buying individual bonds offers control, transparency, better oversight, and better principal protection, but requires more research and capital investment. Bond funds offer more liquidity and diversification without the need for investing a large amount of capital, time, and management expertise.

Bonds are a type of investment designed to aid governments and corporations to raise money. In a mutual fund, money collected from various investors is taken together to buy a large variety of securities.

As of July 2024, there were 96 million matured unredeemed savings bonds held by investors. If bonds are held past their maturity date, the bonds can lose value due to inflation. To understand how this value is lost, see the illustration below.

However, investors who sell their bonds prior to maturity will only receive the interest due on the bond until the date of the sale. They will lose all rights to the interest that would have accrued between the date of the sale and the bond's maturity date.

2024 is 'a good time to hold bonds'

That year, the Federal Reserve embarked on a dramatic campaign of interest-rate hikes in response to inflation, which reached a 40-year high. Bond funds tend to lose value when interest rates rise, and when inflation ticks up.

Answer. The minimum investment for the fund is $10,000, as it's the lowest amount among the provided options. The minimum investment for this fund is $10,000. To determine the minimum investment for the fund, we need to refer to the provided options: $3,000, $8,400, $10,000, and $16,000.

May 1, 2024. Series EE savings bonds issued May 2024 through October 2024 will earn an annual fixed rate of 2.70% and Series I savings bonds will earn a composite rate of 4.28%, a portion of which is indexed to inflation every six months.

Sitting in cash also presents an opportunity cost as it forgoes potentially better investments. Bonds provide interest income that often meets or exceeds the rate of inflation, and with the potential for capital gains if bought at a discount.

Is it better to put money in savings or bonds? ›

Traditional savings and money market accounts allow you to earn interest and access your money right when you need it. Bonds, on the other hand, grow slowly in value and are worth the most after 20 to 30 years. Consider savings bonds for your long-term savings goals.

The management fee: Management fees for the more actively traded bond funds can be higher, which may lead to lower returns. In contrast, when owning individual bonds, there's usually a commission charged when the bond is purchased, and unless it's sold prior to maturity, there are no other charges.

The disadvantages of bond funds include higher management fees, the uncertainty created with tax bills, and exposure to interest rate changes.

Bonds remain a safe, easy way to save and earn money over time. The Treasury guarantees to not only pay you back – but to double your initial investment over 20 years.

2024 is 'a good time to hold bonds'

That year, the Federal Reserve embarked on a dramatic campaign of interest-rate hikes in response to inflation, which reached a 40-year high. Bond funds tend to lose value when interest rates rise, and when inflation ticks up.

I bonds have earned their reputation as an inflation-fighting tool for retirees. As of May 2024, I bonds are returning 4.28%, which is lower than the same period in 2023 but still well ahead of the inflation rate of 3.5%. The previous I bond rate stood at 5.27%, set in November 2023.

There are advantages to purchasing bonds after interest rates have risen. Along with generating a larger income stream, such bonds may be subject to less interest rate risk, as there may be a reduced chance of rates moving significantly higher from current levels.