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Government Bonds

Add a safe option to your portfolio by investing in government bonds

By Tai G., Writer
Unlike stocks, which represent equity ownership, bonds represent debt. This may sound like a risky investment; but in the case of government bonds, it's advantageous, since debt holders are prioritized over shareholders when it comes to getting paid. Therefore, government bonds are a secure place to invest your money.

There are various types of bonds to consider when investing. The US savings bond, however, is by far the safest investment. For this reason, the government savings bond should definitely be a part of your portfolio. Other advantages of the US savings bond include:

1. Government bonds, i.e. treasury bonds, are “risk free,” because the government is responsible for paying you back.

2. Government bond rates outperform stocks in certain economic conditions, such as a recession.

3. US government bonds offer security to certain types of investors, such as retirees.

 

Choose US government savings bonds over savings if you have time to let the bond mature

Banks are safe, but so are US savings bonds. The difference is in the interest rates, as well as the accessibility of your money. If you can afford to invest a percentage of your money for a long period of time, you'll receive a higher interest rate with US government bonds over a savings account. Appropriate reasons to invest in bonds include saving for a child's college education or retirement.
Try: I recommend The Federal Reserve Board for additional information regarding investing in the US savings bond.

Explore the various types of bonds available to investors

Municipal bonds, government I bonds and junk bonds are just a few bond options available to investors. They are not all one and the same, however. If you are looking for safe and conservative, then governments bonds are appropriate. Be cautious of high risk options, such as Junk bonds.
Try: I recommend InvestinginBonds.com and Wells Fargo for a listing of different bonds, including US government savings bonds.

Include government savings bonds in your investment portfolio

You really cannot go wrong by including US government bonds in your portfolio. You can also better calculate your return because of the predictability of US government savings bonds. For retirees, this is a welcomed advantage. They can calculate what their expected earning would be on a US treasury bond.
Try: Check out information provided U.S. Securities and Exchange Committee to see what they have to say about asset allocation. It offers the brief explanation on stocks versus bonds.

 

  • There is a rule of allocation in the investing industry. Basically, you subtract your age from 100. If you're 35 years old, then it's considered wise to invest 65% of your assets in stocks and 35% in US savings bonds and cash. With this formula, you gradually increase your low-risk holdings as you near retirement.

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