Jan 98 Series EE vs the stock market

Tuesday, April 3rd, 2007
Categorized as: Savings Bonds and competitive investments

On the home page of my original Savings Bond site there was a graphic showing the relative performance of Series EE Savings Bonds and the popular Vanguard 500 Index fund.

On this site I’ve replaced it with a Series I Savings Bond graph, because I bonds are much more popular nowadays.

In addition, the I bond graph shows the current value of monthly investments. The EE bond graph on this page shows the current value of a single investment made in January 1998.

The primary reason for both graphs is to demonstrate that the value of stocks goes both up and down, while Savings Bonds only go up.

This year the stock market has been moving up and the 1998 stock market investment is doing better than the Savings Bond investment.

Graph: Series EE Savings Bond vs the Stock Market

As of April 1, 2007, the 1/98 Series EE is worth $1.46 per dollar invested, while the Vanguard Fund, including both dividends and price change, is worth $1.65.

During March, the dividend yield of the Vanguard fund was 1.74%, as compared to the 1/98 Series EE October interest rate of 4.39%. Based on dividends alone, Savings Bonds are clearly the better choice.

Of course the other element, which Vanguard has and Savings Bond don’t, is the level of prices for the 500 stocks that make up the index. If you buy when stock prices are low and sell when they are high, stocks will do quite well for you. On the other hand, you buy high and are forced to sell low because you need the money, you’d have been better off in Savings Bonds.

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FDIC Insured Certificates of Deposit can pay 1 or 2% more than savings bonds when held for a similar length of time. See top CD Rates Below:

4 Comments

On April 7th, 2006 Nico said:

Any chance you can share the spreadsheet that makes these charts? I’d love to play with some of the assumptions.

On April 7th, 2006 Tom Adams said:

The Vanguard data is available on its web site at http://www.vanguard.com, although you have to log in to an account there to get it. I use the price and dividend rate for the first business day of each month.

Because I assume all dividends are reinvested, the spreadsheet has to track the shares owned month by month.

Leave three columns for the Vanguard data (date, price, dividend) and make the fourth column the number of shares owned.

The fifth column is the number of shares purchased. In months in which you add shares (on this chart, the share purchase occurs only in the first month, on my I bonds chart, share purchases occur every month) use 1 divided by that month’s price as the number of shares purchased.

The sixth column is the number of shares obtained through reinvested dividends. It’s the number of shares owned at the beginning of the month times the dividend rate divided by 12. You have to divide by 12 because the dividend rate is an annual rate, but you’re adding shares monthly.

Once you know how many shares you have at the beginning of each month, just multiply that by the month’s price column to get the value of the investment, which goes in the seventh column and is the number that ends up on the graph.

On April 13th, 2006 Nico said:

Thanks! I’ve recreated the Vanguard graph based upon your detailed explanation. Now I’ve got to see if I can figure out how to create the EE or I graphs.

On April 13th, 2006 Tom Adams said:

For the EE and I graphs, download the current Savings Bond Wizard data file. Put it in its own directory. This is an .exe file, so next you have have to “run” it, which causes it to put a set of text files in the same directory, one text file for each series of Savings Bonds.

These files have five columns of numbers separated by tabs.

The first column is the value-as-of month and the second column is the issue month. May 1941 is month 1 and they just go up from there.

The third column is the redemption value of a $25 bond of that issue in that month. The fourth column is the lifetime yield of that issue through that month.

The last column is the interest rate of that issue in that month. If there’s a negative number in this column it means the rate hasn’t been determined yet.

To get the EE bond data for the graph on this page, load the file named crv_ee.txt into a spreadsheet. Add a sixth column that divides the third column by $12.50, the initial investment for a $25 EE bond.

Next set a filter on the second column so it only shows month 681, which is January 1998. The sixth column now has the data for this graph.

Comments Closed

June 1, 2010

After six years, over 400 posts, 3,680 real comments, and over 90,000 spam comments (thank you, Akismet, for making managing a blog with comments possible), I am closing public comments on Savings-Bond-Advisor.com. I will contine to update the main articles on this site, but not the comments.

Virtually every question about Savings Bonds has been asked and answered on this site multiple times. Use the search feature (see the box in the gray area near the top of this page) or the detailed menu on the lower part of the home page to find the information you're looking for. If you have a copy of Savings Bond Advisor, you can ask me a question here.

Tom Adams

Savings Bond Calculator



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