Looking to Buy I Bonds? You May Want to Get Moving ASAP

It's a good investment -- if you capitalize on it now.

It's hardly news to anyone that inflation has reached sky-high levels this year. These days, consumers are racking up higher credit card tabs to buy groceries, clothing, and just about everything else. And all of this is coming at a time when the stock market has been extremely volatile and a lot of portfolios are down.

If you have money to invest right now, you may be hesitant to load up on stocks. But I bonds could be a good choice instead. 

I bonds are government-backed bonds whose interest rate is pegged to inflation. Most of the time, when you invest in bonds, you'll be paid a fixed interest rate. But I bonds work differently, as they come with a rate that's partially variable. 

Right now, I bonds are paying a lot of interest because inflation has been so high. So if you're looking for an investment that can deliver a solid return without taking on the same risks of buying stocks, then I bonds are a good choice.

But if you're going to buy I bonds, it pays to do it now. If you hold off beyond Oct. 31, you'll lose out on the chance to score a more favorable interest rate. 

Don't miss out

Right now, you can enjoy a 9.62% interest rate on I bonds. That's comparable to the stock market's average annual return (to be clear, usually, bonds in general offer a much lower return than stocks).

But if you wait until Nov. 1 to purchase I bonds, you won't get as high a rate. It's estimated that starting in November, the annual interest rate for I bonds will fall to 6.48%. 

Now to be clear, that's still a good interest rate for an investment that's government-backed. But if you have the money to buy I bonds now, you might as well not delay that purchase. 

Do I bonds make sense for you?

I bonds are a great investment right now because they're paying so much interest. During periods when inflation is lower, they're a less lucrative choice.

Of course, as mentioned earlier, the interest rate on I bonds can fluctuate based on inflation. So while you might snag a higher interest rate now, you may find that the rate on your I bonds falls through the years. So that's really where the risk of I bonds comes in. You don't have to worry about not getting paid interest, but you might get less interest one year compared to another.

Also, I bonds need to be held for at least a year before they can be cashed out. And you'll be penalized if you cash yours out prior to having held them for five years. Stocks, on the other hand, can be sold at any time without penalty.

Still, if you're looking for a relatively safe investment, it pays to consider I bonds -- and soon. While a savings account is a safe place for your money, right now, you might get 2% to 2.5% annual interest on your savings. If you buy I bonds before October wraps up, you could earn a lot more interest on the money you're not using.