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00:28 Skip Intro
01:39 How to Purchase TIPS
02:03 What are IBONDS And How to Purchase
02:55 Summary
03:19 Discussion About The Stock Market
07:08 SCHP TIPS FUND Review

So Bonds are typically issued by companies or a government as a way to raise money for projects or other governmental expenditures. As an investor, you are paid with interest income in exchange forgiving your money to purchase a bond. The more risers the organization’s expenditure, the higher the higher the interest payment in order to entice investors buy the bond.

When you redeem your interest payments, you will be taxed on the capital gains. People also
consider inflation as a hidden tax, which secretively eats away at your return by reducing your purchasing power.

TIPS
Investors can also purchase bonds that are inflation protected. Meaning that when inflation
increases, the principal of TIPS increase, but when there is deflation, the principal also decrease. It does this by tracking the consumer price index or CPI for short. Here tips pay interest twice a year, at a fixed rate which is applied to the principal.

The good news is that TIPS are backed by the US Government, and unlike a company that tend to go out of business, your won’t have to worry as much about being paid your interest and principal back.

Terms
They can be purchased on treasurydirect.gov in terms of 5, 10, and 30 years with a minimum
holding time of 45 days. They can also be held until the bond matures, or sold before, however there doesn’t appear to be a mention of a penalty here.
Both interest income and growth in principal are tax exempt from state and local income tax,
however they are both subjected to federal income tax.

What is an I Bond?
Series I Savings Bonds are inflation linked bonds, hence the name I Bond. They can only be
purchased from the government, and are not traded on a secondary market, meaning you can’t sell them to anyone else. Currently, the Initial interest rates of new series I Savings bonds is 9.62 % in which you can purchase at this rate through October 2022.

Here are the rates and terms:

According to treasury direct, I bonds interest rates is determined from a fixed rate and a semiannual interest rate. Interest, if any is adding to the bond monthly and is paid when you cash the bond.I Bonds are also sold at face value, in other words you pay $50, for a $50 bond.

They are also Tax Exempt by state, and political subdivision of a state, however, interest earnings
are subjected to federal income tax, but may be except if used to finance education.

A quick recap:
Bonds are issued by entities to raise money for expenditures.
Some bonds like TIPS and I Bonds offer protection against inflation.
Both TIPS and I Bonds offer some tax exemption on interest income and principal growth
Both TIPS and I Bonds can be purchased at treasury direct, with minimum holding times….(read more)

LEARN MORE ABOUT: Treasury Inflation Protected Securities

REVEALED: Best Investment During Inflation

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