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TIPS, savings bonds offer safety

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Dear Dr. Don,
I have $2,000 to invest and would like a secure, long-term investment. Any suggestions?
— Glennie Govies

Dear Glennie,
You’ve identified your investment horizon — long term. You’ve indicated your attitude toward risk by saying you want a secure investment. That generally means you don’t want to risk the investment losing value.

But you haven’t discussed what you want to accomplish with this money.

Are you investing for retirement? Looking to fund a college education? Planning to take a trip around the world? For any of these investment goals, a $2,000 investment is the start of an investment program, not enough to fund the goal by itself — regardless of how the money is invested in a low-risk investment.

Speaking of starting points, if this $2,000 represents not just your investable assets, but also your sole source of ready cash, consider establishing an emergency fund. The Bankrate feature “Creating an emergency fund” will help you decide if that’s the best place to hold this $2,000.

If you’ve already funded an emergency fund, we’re back to your original goal to invest in a secure, long-term investment. To my mind, the best vehicles for that are either Series I savings bonds or Treasury Inflation-Protected Securities, both of which can be bought directly from the U.S. government by setting up a TreasuryDirect account.

These investments are secure and protect the purchasing power of your long-term investment because they are indexed to inflation. The TreasuryDirect Web page “Comparison of TIPS and Series I Savings Bonds” can help you decide between the two investments.

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