This Investment Makes Lots of Sense Right Now -- But You Can’t Buy It Through Your Brokerage Account

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  • During these turbulent times, many investors are looking to buy assets whose value won't swing wildly.
  • I bonds are an investment worth making since they're offering a solid return right now.

It offers stability and a great return.

Investing in a brokerage account is a great way to grow wealth for the future. And you might own a host of assets in your brokerage account, from stocks to exchange-traded funds to cryptocurrency.

All of these assets have a lot of growth potential. But they can also be volatile (especially crypto). And given that many experts have been sounding recession warnings, you may want to put some of your money into an investment whose value is less likely to fluctuate to an extreme.

Of course, your goal in investing shouldn't just be to limit your risk -- it should also be to score a nice return on your money. And in that case, there's one specific investment worth looking at right now.

The only problem is that this particular investment is one you can't buy through your brokerage account. So it might take a little bit longer to put your money there.

It's a great time for I bonds

I bonds are government-backed bonds whose interest rate is tied to the rate of inflation. Because those bonds are issued by the U.S. Treasury, their face value is nice and stable. And right now, I bonds are paying a very impressive rate of 6.89%. In fact, that's the rate you'll be able to lock in if you purchase your bonds between now and April of 2023.

Now to be fair, if you put your money into stocks, you might generate a higher return than 6.89% a year. But also, with stocks, you're taking a big risk that they might lose value. With I bonds, you're not looking at that same risk.

That said, investing in I bonds carries another type of risk: that the interest rate on your bonds will decline over time. But if that happens, you can always sell those bonds and put your money into an asset that's more lucrative.

Granted, you must hold your I bonds for at least one full year after purchasing them, and there are penalties for selling them before five years. But those penalties might be worth paying if the interest rate on I bonds drops substantially. And given where inflation is today, that's unlikely to happen for a while.

How to buy I bonds

If you have a brokerage account, you may be used to simply logging on and buying stocks with the click of a button. But unfortunately, you can't buy or hold I bonds in a brokerage account. Instead, you'll need to create an account on the U.S. Treasury's website and buy your bonds directly from there.

The process can be a touch time-consuming, but it's not awful. All you'll really need to do is enter some personal information and link your Treasury Direct account to an existing bank account so the money for your I bonds purchase can be withdrawn. All told, it shouldn't take more than 15 or 20 minutes.

I bonds won't necessarily always be a great investment. But given the interest rate they're paying right now, they may be a smart choice for you. And you definitely shouldn't let the extra steps needed to acquire them stop you from adding them to your portfolio.

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