Sizemore on Buying Inflation-Protected Bonds in 2012

Charles Sizemore gave his thoughts on inflation-adjusted savings bonds to Reuters’ Lou Carlozo:

As the times and technology advance, once-essential parts of our lives turn into pop cultural relics, from transistor radios to cell phones the girth of six-inch subs.

Now add the once ubiquitous paper U.S. savings bond, which will no longer be sold as of Sunday, January 1. That’s enough for some folks to make a pre-New Year’s Eve dash to the bank or credit union.

Some people may be racing for traditional Series EE bonds, so they can show their grandchildren what they look like. But for more people, it’s a chance to amass some high-yield inflation-proof Series I Savings bonds.

Here’s why: While you can buy $10,000 in I bonds today – $5,000 each in paper and electronic form — you can only buy half that much come New Year’s Day, when paper bonds go the way of the dodo. (Electronic bonds will remain available through TreasuryDirect.gov.)

True, paper bonds have a rich history that ties in to American patriotism and gift giving in families.

“The savings bond is an old product that’s been around forever, that grandparents bought for their grandkids to put in college funds — so it makes a big splash when you discontinue an investment option people are used to,” says Charles L. Sizemore, principal of Sizemore Capital Management in Dallas, Texas and author of the Sizemore Investment Letter.

Though new purchase limits take effect next week, “there are different ways to skin this cat,” Sizemore says. “If you want inflation protection, the I bond is a great investment. But there’s also the TIPS bond fund, which allows you to reach the same objective — inflation-adjusted bond returns.”

Like I bonds, TIPS pay a predetermined yield while adjusting the value of the bond’s principal to preserve purchasing power.

You can buy them through TreasuryDirect.gov or through a broker, and they essentially work much like I bonds. There are also several mutual funds that focus on TIPS.

To read full article, see Limited-time offer: Hurry for savings bond deals, certificates

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