Suze Orman Says This Is the Best Investment You Can Make Right Now

It may be time to put it on your list.

These days, living costs are through the roof. But this isn't the first time U.S. consumers have had to grapple with rampant inflation. Back in the 1980s, the cost of goods skyrocketed to the point where many people couldn't keep up. 

Meanwhile, in May, the Consumer Price Index, which measures changes in the cost of consumer goods, rose 8.6% in May. That's the highest annual increase since late 1981. And unfortunately, if you ask financial expert Suze Orman, we can expect high levels of inflation to be with us for quite some time. 

Now those with money in savings can dip in as needed to cover higher living costs. But those without savings, risk landing in debt just to meet their basic needs.

Meanwhile, today's economic times make savings accounts seem less appealing for one big reason -- they don't pay enough interest to keep pace with inflation. Not even close. 

That's why Orman recommends one key investment for today's economic climate. And it's something worth considering for your portfolio.

Are I bonds right for you?

I bonds have been on more people's radar lately, and according to Orman, they're the No. 1 investment to own right now. Generally speaking, the drawback of investing in bonds is that they tend to offer lower returns than stocks. But I bonds work a little differently.

Most bonds offer a fixed interest rate from the start. I bonds come with a variable interest rate that's pegged to inflation so that when living costs are up, bondholders get to collect more interest. I bonds are also backed by the U.S. government, making them virtually risk-free. 

Now, there's a limit as to how much money you can put into I bonds, and it's $10,000 per person, per year. But if you're not sitting on nearly that much cash, that's okay. You can buy I bonds in increments as little as $25 if you so please.

How to buy I bonds

Many people are used to investing in a brokerage account. But to purchase I bonds, you'll need to go directly to the U.S. Treasury's website. 

Are I bonds really risk-free?

I bonds are risk-free in that they won't lose face value. If you buy $10,000 in I bonds, your investment won't be worth less than that.

But that doesn't mean they don't have drawbacks. When you buy I bonds, you run the risk of tying up cash you can't access. That's because you're not allowed to redeem I bonds for a full year after buying them.

Plus, if you cash out your I bonds within five years, you'll be penalized to the tune of three months of interest. That's something to consider, because while high inflation levels make I bonds a good investment now, if those levels drop in a couple of years, you'll earn less interest on your bonds. But still, Orman feels strongly that I bonds are a good buy today.

A near-term investment strategy

While it could make sense to add I bonds to your portfolio at present, generally speaking, you shouldn't count on them as your go-to long-term investment. Remember, I bonds pay well when inflation is up. When it's not, the interest rate on your bonds could leave much to be desired. 

If you're looking for a long-term investment -- one you're relying on to build a retirement nest egg -- then stocks are actually a better bet, because in the long run, they're more likely to deliver stronger returns. And while stocks are a riskier investment than I bonds in that they can lose value, if you hold them for many years, you'll have plenty of time to recover from market downturns.

What’s more, with I bonds, you're limited to an investment of $10,000 a year. That may be enough to meet your retirement goals. But if that's not the case, and you want to sock away more money than that on an annual basis for retirement, then you'll need to look at different options. But for right now, you may want to take Orman's advice and look into I bonds while inflation soars.