This Investment Is Guaranteed to Test a Long-Term Saver's Patience

The 20-year treasury constant maturity rate hit 1.83% today. That's the lowest rate I have ever seen, and I'm 51 years old.

You'd think I'd be crazy for telling a long-term saver that it is a relative bargain. You'd be right. Not only would I be crazy, but I'd be Game of Thrones Ned Stark raving mad. I'd have lost my head!

The relative bargain for patient long-term savers is the EE savings bond. If you buy it today, it is guaranteed to double in 20 years. That works out to 3.53% per year. That's a full 1.7% more than a 20-year treasury also purchased from the US government.

In order to get the 3.53%, you must hold the full 20 years. That's going to require serious patience. The patience doesn't end there though. For new investors, that yield is guaranteed through October. There's no hurry. Bonus points will not be awarded for locking it in early. You can therefore patiently wait until October to make the decision to buy. I strongly suggest waiting.

I know what you must be thinking. A lot can happen in 20 years. Rates may rise, especially if inflation gets out of control. Could ruin you. Could ruin me. That's absolutely true. What's also true is that rates could continue to fall though, just like they've been doing for nearly four decades. Very few financial "experts" ever warn about that outcome though. Why is that? You'd think Japan and ZIRP would give at least some of them reason for pause and/or self-doubt.

There are no sure thing investments. I can say the following five things with absolute certainty though.

1. You will be earning the exact same 3.53% rate that I'm earning on the EE savings bonds that I first started buying in 2010 (just 14 years to go on those). I intend to buy this year again, in October. Until then, I patiently wait.

2. I cannot profit off your decision by so much as a penny, no matter what you do. Buy them or not, makes no difference to me. There is no market price for savings bonds. I am not rewarded if people flood into them. I get what I get. Further, I cannot profit off of your transaction. Nobody can. You buy directly from the government. There are no middlemen looking to take a cut. I find that refreshing in this era of greed.

3. My only motivation is to inform. Some may not be aware of this alternative. The banks certainly aren't going to tell you if you are looking to buy a long-term CD. They certainly never told me when I first started buying I-Bonds in 2000!

4. All bets are off on November 1st. Although those buying EE savings bonds before then are guaranteed the rate if held 20 years, there's no telling what the terms will be for those investing later. If rates do keep falling, the risk of the terms changing unfavorably continue to rise. I'm amazed that the terms haven't already changed.

5. If EE savings bonds end up being a truly horrible investment over the next 20 years, which they very well could be, know you will not be alone. I will be right there with you, licking my wounds too. The one "saving" grace will be that at least we didn't buy the 20-year treasury and hold to maturity, or buy stocks counting on permanently low rates to support their high leverage. Could potentially be worse, lol. Sigh.

This is not investment advice.

Sitting in a sizable inflation protected treasury bond ladder, a rather substantial inflation protected I-Bond ladder, a very modest amount of potentially riskier and potentially more rewarding EE savings bonds, and cash (for short-term needs, emergency funding, and for potential future investment opportunities), all for the long-term. Not a single regret about any of it. I retired in 1999. After fully recovering from the dotcom bubble, this baby boomer lost the desire to swing for the fences in 2004, near the peak of the housing bubble. Not ever swinging again. Don't need to. Been there, done that. Done.

If you absolutely need to swing for the fences, then go for it I guess. Just make sure you aren't confusing want and need. You need to swing if your personal loan shark will kill you if you can't give him back the 50 grand you previously blew on sure thing day trading investments. You want to swing if your 2015 convertible has tragically lost that new car smell that once made it such a pleasure to drive at the same time your butler is looking for a raise. Just sayin'. ;)