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. Over 500 companies allow investors to purchase their first share - and subsequent shares directly. All industry segments are represented, including almost half of the companies that comprise the Dow Jones Industrial Average. Index funds hold stocks that comprise a market index.