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.
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.