Buying I Bonds in November? Here's the Rate You Can Expect

It's a generous rate -- but not as high as it's been in the past.

There's a reason so many investors rushed to buy I bonds earlier on in the year. I bonds are government-backed securities whose interest rate is tied to the rate of inflation. Since inflation has soared this year, I bonds have been paying generously. And because they're a relatively safe investment, they've been a source of relief for investors who are otherwise seeing year-to-date losses in their brokerage accounts due to ongoing stock market volatility.

That said, if you purchase I bonds in November, you may end up a bit disappointed. The reason? The rate on I bonds has dropped compared to what these bonds were paying for the previous six months. But that doesn't make them a poor investment.

What to expect from I bonds today

I bonds are paying an annual interest rate of 6.89% through April of 2023. That's a pretty generous interest rate within the context of bonds. However, it's a lot lower than the 9.62% interest rate investors got to enjoy if they purchased their I bonds between May and Oct. 2022.

In fact, many investors rushed to purchase I bonds in late October, knowing full well that waiting until November would result in a lower interest rate. I bonds can only be purchased through the U.S. Treasury, and traffic to that website was so heavy in late October that the site itself went down for a bit.

For context, though, today's I bonds rate is the third-highest that's been available since this product became available back in 1998. And it's a higher rate than what many corporate bonds (those issued by companies) are paying.

Plus, there's something to be said for buying an investment whose value is stable. If you buy $2,000 worth of stocks, that investment might only be worth $1,000 in a year or two if the company behind those stocks underperforms or the stock market continues on a downward spiral. But if you buy $2,000 worth of I bonds, you won't have to worry about the face value of your investment being worth less than $2,000.

Now that said, the interest rate on I bonds changes over time and is pegged to the rate of inflation. So if you start out earning 6.89% on your bonds, that won't necessarily be the rate you're privy to for as long as you hold them. But right now, that's a very appealing rate, so it could be worth adding I bonds to your portfolio.

How much should you invest in I bonds?

Thinking of putting half your life's savings into I bonds? Not so fast. You can only purchase a total of $10,000 worth of I bonds in a single calendar year. And anyway, while it's a good idea to put some money into I bonds, you don't necessarily want them to make up 50% of your total investment portfolio.

If you have the option to put $10,000 into I bonds, that's not necessarily a bad idea. Just know that you must hold your bonds for at least a full year before selling them, though.

And also, selling I bonds before having held them for five years could result in penalties amounting to a few months' worth of interest. Stocks, by contrast, are a lot more flexible in that you can buy and sell shares whenever you want, so it's important to understand these rules before diving into I bonds.