The ABCS of ‘I bonds’

What are “I bonds”? — P.G., Mansfield, Ohio

Series I savings bonds are offered by the U.S. government with interest payments that are adjusted for inflation. You can buy as little as $25 worth or as much as $10,000 per year (per individual) at Treasurydirect.gov.

The interest paid by “I bonds” has two components — a fixed rate and a variable rate adjusted twice a year to account for inflation. At the time of this writing, the rate was a robust 7.12 percent for bonds bought through April 2022. (Inflation has been unusually high recently, resulting in the high rate.)

The I bond has a “maturity,” or lifespan, of 30 years, and the interest you earn on it is paid when you redeem it. You can redeem it as soon as one year after buying it, but you’ll forfeit the last three months of interest. After five years, you can redeem the bond without penalty.

I bonds can protect your money, but your long-term dollars are likely to grow much faster in stocks.

I’ve been investing directly in a certain company’s stock for a long time without paying any broker commission fees. Is that smart? — S.B., St. Augustine, Fla. There’s nothing wrong with it. You’re probably investing via a direct investing plan or dividend reinvestment plan (“DRIP”). Such plans have existed for many years and are offered by lots of companies.

These days, though, many brokerages will also reinvest your dividends in more shares (or fractions of shares) of your stocks. And many brokerages also don’t charge any trading commissions.