Inflation Indexed Treasury Securities are another recent investment option. They are debts of the U.S. government and are sold in quarterly auctions. They can be bought and sold through brokers or through the Federal Reserve's Treasury Direct program. Investors earn more because they get a percentage of a higher dollar amount. Noted financial author, Jeremy Siegel, believes that inflation-indexed treasuries are a good complement for stocks in a portfolio.
Federal tax is owed on the annual increase in principal.
Series I bonds were introduced in 1998. Like inflation indexed treasuries, they are indexed for inflation to protect purchasing power. Interest is added monthly and paid when a bond is cashed in. They can be held for up to 30 years and are sold at full face value. Investors may redeem their bonds after 6 months but pay a 3-month penalty on redemptions before 5 years.