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<ul><li>The 2022 boom in I-Bonds appears set to end as interest rates tied to the security plunge.</li><li>I-Bonds are expected to pay an interest rate of just 3.8% next month as inflation cools down.</li><li>I-Bonds will be less appealing to investors due to its long lock-up period and higher interest rates at money market funds.</li></ul>The 2022 boom in I-Bonds appears poised to end as the interest rate offered by the securities are set to plunge next month to levels <a href="https://markets.businessinsider.com/news/stocks/apple-high-yield-savings-account-comparison-hysa-yields-aapl-2023-4?_gl=1*so1p7b*_ga*MTkxNzQzNjc2Mi4xNjYxNDU2MDU1*_ga_E21CV80ZCZ*MTY4MTk5OTI4MS4xMDAwLjEuMTY4MTk5OTU1My42MC4wLjA.">below most money market funds and high-yield savings accounts.</a>Interest rates for I-Bonds <a href="https://www.bloomberg.com/news/articles/2023-04-12/i-bonds-interest-rate-for-2023-yield-is-expected-to-fall-below-4-in-may" target="_blank" rel="noopener">are estimated to fall to 3.8%</a> in May as inflation continues to ease. The Treasury bond resets its interest rate every six months based in part on the latest inflation data.The past six-month period for I-Bonds offered investors an attractive interest rate of 6.89%, and before that the security offered a rate of 9.62%.The <a href="https://www.businessinsider.com/personal-finance/what-are-i-bonds">surge in I-Bond interest rates</a> to levels that were competitive with stock market returns attracted more than $40 billion of inflows last year, according to the Treasury Department. That's a sky-high figure given that I-Bonds have a $10,000 annual purchase limit and require buyers to navigate a website that appears to not have been updated since 1999. A <a href="https://www.businessinsider.com/inflation-report-cpi-september-prices-rent-fed-rates-recession-outlook-2022-10">significant swing in inflation to 40-year highs,</a> after more than a decade of subdued prices, helped give investors good reason to opt for the bond. But as long as inflation continues to cool down, I-Bonds should are likely to attract fewer buyers as plenty of <a href="https://markets.businessinsider.com/news/stocks/apple-high-yield-savings-account-comparison-hysa-yields-aapl-2023-4?_gl=1*so1p7b*_ga*MTkxNzQzNjc2Mi4xNjYxNDU2MDU1*_ga_E21CV80ZCZ*MTY4MTk5OTI4MS4xMDAwLjEuMTY4MTk5OTU1My42MC4wLjA.">cash-equivalent securities offer a higher interest rate</a> without the long lock-up period that I-Bonds require.For example, <a href="https://markets.businessinsider.com/news/stocks/apple-high-yield-savings-account-comparison-hysa-yields-aapl-2023-4?_gl=1*so1p7b*_ga*MTkxNzQzNjc2Mi4xNjYxNDU2MDU1*_ga_E21CV80ZCZ*MTY4MTk5OTI4MS4xMDAwLjEuMTY4MTk5OTU1My42MC4wLjA.">Apple's launch of a high-yield savings account this week</a> offers its customers an annualized yield of 4.15, while some money market funds and high-yield savings accounts offer yields as high as 5%.That's significantly higher than the expected I-Bond rate of 3.8%, and offers much more flexibility than the securities, which have a minimum one-year holding period. Additionally, any I-Bonds that are redeemed within five years of purchase will forfeit three months of interest. Unless inflation sees a big rebound in the coming months, I-Bonds are likely to continue to lose their luster with investors as cash gravitates towards higher-yielding money market funds <a href="https://markets.businessinsider.com/news/stocks/stock-market-sell-in-may-and-go-away-summer-rally-2023-4?_gl=1*15zvmi8*_ga*MTkxNzQzNjc2Mi4xNjYxNDU2MDU1*_ga_E21CV80ZCZ*MTY4MTk5OTI4MS4xMDAwLjEuMTY4MTk5OTk0Ny42MC4wLjA.">and even, potentially, back to the stock market.</a>

The I-Bond boom is about to end with rates on the inflation-protected assets set to plunge below cash yields

<ul><li>There's still time to lock in a near 10% interest rate on inflation protected bonds from the US Treasury.</li><li>I-Bonds have gained immense popularity this year given deeply negative stock market returns and high inflation.</li><li>Here's how investors can buy I-Bonds before interest rates reset later this month.</li></ul>I-Bonds issued by the US Treasury have gained immense popularity among investors this year as inflation has soared while <a href="https://www.businessinsider.com/how-to-invest-stocks-inflation-strategy-bear-market-rally-keller-2022-10">stock market returns turned deeply negative.</a>The essentially risk-free government bonds <a href="https://www.treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/">offer both a fixed interest rate</a> (currently 0%) and an inflation rate that changes every six months. That means this year, given that inflation soared to 9.1% in June, I-Bonds have offered an attractive alternative to investors compared to holding cash, bonds, or stocks. But with <a href="https://www.treasurydirect.gov/savings-bonds/i-bonds/">I-Bonds' inflation rate set to reset</a> to a lower estimated rate of about 6.5% on November 1, investors need to purchase their I-Bonds security by October 28 to secure their current interest rate of 9.62%.Here's everything you need to know about I-Bonds, and how you can buy them before their interest rates reset later this month.Series I-Bonds were first issued by the US government in 1998, but they were never a popular option with investors given the attractive returns generated by both stocks and other bonds. On top of that, inflation had for the most part remained subdued in the low single digits for much of the time I-Bonds have been around.But today's environment of elevated inflation, with monthly <a href="https://www.businessinsider.com/inflation-report-cpi-september-prices-rent-fed-rates-recession-outlook-2022-10">CPI prints often hitting 40-year highs,</a> changed all of that.Today's annualized interest rate of 9.62% for I-Bonds is the highest since November 2021's rate of 7.12%. Before then, the highest I-Bond rate was 5.70% issued in November 2005. Here's how to buy I-BondsIn order to buy I-Bonds, investors need to open up an account with the US government's <a href="https://treasurydirect.gov/">Treasury Direct</a> website. This is an incredibly outdated website that is often plagued by bugs and downed maintenance periods during inconvenient times. Once your Treasury Direct account is set up, you can connect your bank account electronically and transfer money to make purchases.How many I-Bonds can you buy?Each tax payer is limited to purchasing $10,000 in I-Bonds per year. Additionally, each taxpayer can buy up to $5,000 in paper I-Bonds with your tax refund. Finally, a business can purchase up to $10,000 in I-Bonds as well. What's the downside?The biggest downside to buying I-Bonds <a href="https://www.businessinsider.com/personal-finance/not-investing-i-bonds-high-interest-rates-2022-8">is the lock-up period.</a> Any I-Bonds purchased must be held for at least one year before they can be redeemed. If you cash in the bond in less than five years of holding it, you lose three months of interest payments. After five years, I-Bonds can be redeemed with no penalty. I-Bonds have a 30-year maturity. The I-Bonds rate can also look at a lot less attractive over the lifetime of holding them if inflation falls back down to pre-pandemic levels.Finally, I-Bonds cannot be purchased in retirement accounts like an IRA, and they are subject to federal taxes.What's the risk?Because I-Bonds are issued by the US Treasury, they are essentially risk-free fixed income securities that protect you from the rate of inflation. Having said that, there is one risk investors should consider when purchasing I-Bonds: opportunity cost.Putting up to $10,000 in I-Bonds is attractive right now given their near 10% interest rate, but with stocks down 25% year-to-date, the argument can be made that despite the volatility, now might be a better time to buy stocks if you have a time horizon longer than a few years.But stocks can be volatile and uncertain, and what is certain is I-Bonds' current 9.62% interest rate, hence their surging popularity this year.

Here's how to invest risk-free money in government I-bonds at a return of nearly 10% before rates reset at the end of October

<div class="image-container float_right" style="width:400px"><div class="image"></div>AP</div><keyword id="6354427" type="CITY" weightage="60" keywordseo="Apple">Apple</keyword> announced today that it would crank up its <a href="http://www.businessinsider.com/apple-increases-capital-return-plan-2013-4">quarterly cash dividend</a> by 15% to $3.05 per share, and it would expand its <a href="http://www.sec.gov/Archives/edgar/data/320193/000119312513167469/d525706dex991.htm">share buyback plan</a> by $50 billion to a total of $60 billion.
Perhaps the most interesting thing about this ramp up in its capital return plan is that it will finance some of it by borrowing money.
"In conjunction with the expanded return of capital program, the Company plans to borrow and expects to announce more details about this in the near future," <a href="http://www.sec.gov/Archives/edgar/data/320193/000119312513167469/d525706dex991.htm">said management</a>.
This means that Apple could soon offer bonds. We'll call them iBonds.
This will be a welcome development for bond investors looking for a higher yield in this extremely low interest rate environment.
Already, <a href="http://www.standardandpoors.com/prot/ratings/articles/en/us/?articleType=HTML&amp;assetID=1245350620003">S&amp;P has given</a> the company an AA+ rating and Moody's has blessed it with an Aa1 rating. Both say that their outlooks for the company are stable.
The idea of debt tends to raise the average eyebrow. But in the corporate world, it comes with numerous benefits. The cost of debt is cheaper than the cost of equity. Also, interest lowers a company's taxable income.
Overall, this seems to be a smart move by Apple.
Earlier this year, legendary NYU finance professor Aswath Damodaran discussed this as one of the four things that could <a href="http://www.businessinsider.com/aswath-damodarans-advice-to-apple-2013-2">make Apple a hot stock again</a>:
4. Behave consistently with your choice: Once Apple makes its stand as a growth or mature company, it has to behave consistently. Thus, if it decides that it is a mature company, it should <a href="http://aswathdamodaran.blogspot.com/2012/03/apple-thoughts-on-bias-value-excess.html">return more cash to its stockholders</a>, though I think stock buybacks make more sense to its stockholder base now than dividends do. At the moment, with its huge cash balance, it clearly does not make any sense for Apple to borrow money, but somewhere down the road, it has to consider the debt option, since not using it is depriving itself of the tax benefits embedded in the tax code for using debt instead of equity.
Keep in mind, much of Apple's cash is overseas, which is a point <a href="http://www.businessinsider.com/apple-q2-earnings-2013-4">CFO Peter Oppenheimer made on Apple's earnings conference call</a>. And repatriating that cash would come with a steep tax.
As Apple said, more details will come in the near future.
Prospective bond investors, however, can prepare by reading the releases from S&amp;P and Moody's.
<a href="http://www.standardandpoors.com/prot/ratings/articles/en/us/?articleType=HTML&amp;assetID=1245350620003">Here's S&amp;P</a>: ----------------
<h3 style="padding-left: 30px;">Apple Inc. Assigned 'AA+' Corporate Credit Rating; Outlook Stable</h3>
<ul style="padding-left: 30px;">
<li style="padding-left: 30px;">Apple Inc. recently announced that it will return a total of $100 billion to shareholders through the end of calendar year 2015, more than double the level of shareholder returns announced in March 2012.</li>
<li style="padding-left: 30px;">Apple indicated that its shareholder return plan will include the use of debt to repurchase shares.</li>
<li style="padding-left: 30px;">We are assigning our 'AA+' corporate credit rating to Apple.</li>
<li style="padding-left: 30px;">The stable outlook reflects our expectation that Apple will maintain very modest leverage, significant net cash balances and a commitment to a minimal financial risk profile.</li>
</ul>
NEW YORK (Standard &amp; Poor's) April 23, 2013--Standard &amp; Poor's Ratings Services today assigned its 'AA+' corporate credit rating to Cupertino, Calif.-based Apple Inc. The outlook is stable. We anticipate that we would also assign this rating to unsecured senior debt that may be issued as part of the shareholder return program, subject to review of the documentation.
"The rating on Apple reflects the company's 'minimal' financial risk profile and 'strong' business risk profile, incorporating market-leading products, a globally diverse customer base and strong profitability," said Standard &amp; Poor's credit analyst Martha Toll-Reed. Although the majority of Apple's revenues are generated in highly competitive markets characterized by rapid technology evolution and short product life cycles, it is our view that Apple's managerial and product innovation capabilities will enable the company to sustain its competitive position. Furthermore, it is our expectation that Apple will maintain "excellent" liquidity, which provides substantial cushion to offset the potential for some volatility in revenue growth and operating earnings.
With annual revenues of $165 billion in calendar 2012, Apple is the largest U.S.-based provider of mobile devices, personal computers, and related products and services. Apple has been an industry leader in the growth of, and market shift to, internet-connected mobile devices (which include smartphones and tablets). The company's core values of innovation, quality product, and quality user experience provide its competitive differentiation. Revenues and earnings are concentrated in iPhone and iPad sales, which accounted for more than 75% of revenues in the December 2012 quarter. However, Apple generates sustained customer interaction through an expanding array of content and service offerings, and benefits from significant customer loyalty. We believe that this, along with its track record of innovation and successful new product development, distinguishes Apple from other consumer device and electronics firms that were unable to sustain their market leadership positions in these rapidly evolving markets. In our assessment, Apple's management and governance is "strong," based on the company's track record of market leadership, effective innovation, and successful performance in relation to its peers.
The stable outlook reflects our expectation that Apple will maintain modest leverage, significant net cash balances, and a commitment to a minimal financial risk profile. While not expected, the most likely cause of a downgrade would result from competitive market conditions that cause a material decline in operating performance and discretionary cash flow, leading to a substantial decline in Apple's net cash position. The potential for an upgrade is currently constrained by our view of Apple's business risk profile, which incorporates highly competitive and rapidly evolving market conditions and Apple's earnings vulnerability to a potential delay in, or modest success of, new product introductions. Therefore, an upgrade would likely depend upon an upward revision to our view of Apple's business risk profile to "excellent," while maintaining a minimal financial risk profile.

Get Ready For Apple iBonds

Cash, the ultimate safety asset in the world of investing, is suddenly the hottest trade on Wall Street.Even with the <a target="_blank" class="" href="https://www.businessinsider.com/goldman-sachs-stock-returns-prediction-different-projections-inflation-bullish-2024-10">S&amp;P 500 up by 22% this year</a>, Americans have poured more than $230 billion into <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/banking/what-is-a-money-market-account">money markets</a>: funds holding cash and short-term debt. Typically, cash is reserved for investors who want <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/what-is-diversification">protection in times of turbulence</a> — the proverbial stashing of money under the mattress. But 2024 has been the second-biggest year for saving money since the 1970s, behind only 2023.What's notable about this flight to cash is that it's not the baby boomers hoarding dollars for retirement; it's <a target="_blank" class="" href="https://www.businessinsider.com/millennials-gen-z-stock-market-baby-boomers-wealth-investing-2024-2">millennials adding to their reserves</a>.In a June survey by Bank of America's wealth-management arm on how wealthy Americans were approaching their finances, the bank's analysts found that over the past two years, 55% of investors between 21 and 43 had increased their cash holdings, compared with 46% of investors 44 and older. That wasn't just young people who got worried about the economy or the risks of a sudden sell-off: The survey also suggested that younger respondents had rosy views of the economy and their finances.I saw the same puzzling trend in investor surveys during my time at eToro, a well-known retail brokerage firm. At the end of 2023, 63% of investors 44 and younger told us they had increased their cash allocations in the past six months (versus just 27% of investors 45 or older). This, despite the fact that younger investors were more optimistic about the economy, their incomes, their living situations, and their investments.There's something driving younger Americans to save their cash, and I don't think it's solely the 5% savings rates.<a target="_blank" class="" href="https://www.businessinsider.com/gen-z-millennials-financial-futures-jobs-economy-money-pandemic-recession-2023-4">Millennial investors have been deeply scarred</a> by two life-changing crises in their young lives. For many millennials, the global financial crisis hit just as they were entering their working years. About a decade later, a once-in-a-generation pandemic — and two painful bear markets — delivered another blow to their psyches.And now, in the prime of their investing years, the echo of those events has made them risk-averse in their investments. Millennials may be protecting themselves well with their ability to save. But when wealth is built on compounding returns over long periods, their distrust of the stock market could set them back in the long run.Young investors have become synonymous with rampant speculation: They <a target="_blank" href="https://markets.businessinsider.com/news/stocks/what-are-zero-day-expiration-options-stock-market-risks-0dte-2023-9">trade zero-day options</a>, hop on <a target="_blank" href="https://www.businessinsider.com/investing-outlook-millennials-meme-stocks-active-investment-robo-advisors-morningstar">the meme-stock rocket</a>, or <a target="_blank" href="https://markets.businessinsider.com/news/stocks/gen-z-investing-social-media-finance-fintok-millennial-investors-2021-7">take extreme risks</a> in the name of <a target="_blank" href="https://www.businessinsider.com/wifi-money-instagram-finance-influencers-angry-investors-lawsuits-2024-5">social-media clout</a>. Sure, some investors adopted this devil-may-care attitude, and I'll never judge somebody for doing what they want with their own money. But if you look at hard numbers from the Federal Reserve about what millennial investors actually own, you can see that this stereotype is misguided.Despite their coming of age in one of the longest stock-market rallies in history, millennials had 19% of their total financial assets in cash as of June 30, the most of any generation. In a way, this makes sense — the younger you are, the less time you have to put your money toward other investments. When you compare millennials' cash levels with Gen X's cash levels at the same age, though, the risk aversion becomes clear. If you were born right in the middle of the millennial generation, you're now 36. These "median millennials" held more cash as a share of their total assets during their 20s than Gen Xers did at those ages — a difference of about 13 percentage points.What's worse, though, is that millennials avoided stocks during some of the best years for investors. As our median millennial grew from 21 to 30, the S&amp;P 500 grew by an average of 11.5% annually, while savings accounts paid next to nothing because of the Fed's zero-interest-rate policy. Millennial savers didn't just give up a precious decade of compounding — they missed one of the longest bull markets in history.While the gap has started to close now that most millennials are in their 30s, the survey data suggests the millennial cash obsession hasn't quite let up.There are plenty of reasons for the recent uptick in cash allocation. Savings and <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/banking/average-money-market-interest-rate">money-market rates</a> leaped as high as 5%, giving investors attractive risk-free returns; <a target="_blank" class="" href="https://www.businessinsider.com/america-new-economic-supercycle-growth-inflation-stock-market-global-chaos-2024-10">geopolitical upheaval means the world</a> feels extremely shaky; and <a target="_blank" class="" href="https://www.businessinsider.com/recession-fears-fueling-stock-market-crash-wall-street-chaos-positive-2024-8">Wall Street pros have been warning</a> about <a target="_blank" class="" href="https://www.businessinsider.com/wall-street-recession-stock-market-crash-calls-wrong-economy-housing-2023-6">a recession for over a year now</a>. But when it comes to younger investors, I think the scars run deeper than worries about a coming downturn.Millennials have had a tumultuous induction into adulthood. Many of them were in high school or college or in their early working years during the global financial crisis. From 2009 to 2014, the unemployment rate was 10% or higher for 20- to 24-year-old Americans. They learned to prioritize cash as they navigated one of the worst downturns in history. Then, just as they were finding their footing, the COVID-19 pandemic hit. We were locked inside our houses for weeks on end while stocks entered one of their swiftest crashes on record. Soon after, we nervously waded back into the wealth-building waters, only to get hit by scorching inflation and another bear market.Every generation has its war stories. Gen Xers had to process 9/11 and the tech bubble bursting in their late 20s. Baby boomers dealt with their own bout of inflation and high rates as 20-year-olds in the 1980s. Their parents were unfortunate enough to experience the Great Depression, a three-year stretch of the darkest economic days in the United States. But there's something especially pernicious about having to navigate not one but two earth-shattering crises early in adulthood.Money can be a highly personal subject. Our feelings of financial stability develop through experiences, not classes or textbooks. A 2017 University of Michigan study found that children as young as 5 could start developing spending and saving habits. There's also a ton of <a target="_blank" class="" href="https://www.businessinsider.com/young-people-are-developing-money-dysmorphia-2024-7">research that suggests financial stress</a> can lead to a litany of physical, mental, and emotional issues. Early financial trauma can profoundly shape your relationship with money. That's why personal finance can feel so illogical at times — why some of us may be set on paper but constantly fear losing it all.I know this well. I'm a young millennial who felt the financial crisis as a teenager. My mom was a part-time bookkeeper at a housing construction company, and my dad was a residential electrician. You could probably guess what happened when the housing market went into a tailspin. I may not have been old enough to open a brokerage account, but I picked up some perverse money habits from the financial crisis that I'm trying to unlearn — even now, as the head of research at a firm that teaches people how to build wealth. Multiply this mentality across a generation, and you have one swath who brought us crypto, Occupy Wall Street, meme stocks, and YOLO capitalism, and another batch that can't seem to take enough risks to build a decent retirement fund. These more cautious ones piled their savings into inflation-linked I-bonds — super-safe government-issued debt that locks away your money for a year — when they hit 9% in 2022. A great decision for an emergency fund, but less savvy when the stock market is plumbing new lows.Saving too much money seems like a good problem to have, but keeping all your money in a savings account can be a huge financial mistake when you consider the opportunity cost. Imagine you put $1,000 in a savings account in July 2023 — at the peak of the Fed's rate hikes — earning a sweet 5% APY on your cash. By October 4, you would've earned about $60 on that money.How does that compare to stock-market returns? Not great.By staying in cash over the past year and change, you missed a 27% rally in the S&amp;P 500. In other words, that $1,000 would've turned into about $1,277 if you'd invested it in a no-fee index fund. There were strong gains to be had in other major indexes, too: a 28% climb in the tech-heavy Nasdaq 100 and an 18% rise in the mega-company Dow. Yes, even your grandma's index beat your cash return.Of course, stocks and cash are different financial beasts. Cash can be dependable in tough times, and it's often the best place to stash away funds for a big purchase. It also makes sense to have some cash on hand. Stocks, by contrast, are often far from stable. Lots of popular stocks have dropped 10% to 20% of their value in a single day, and you could theoretically lose all your invested money in the stock market. But as scary as that sounds, it's the essence of risk-taking; you give up stability for potentially greater returns over time. If you have decades ahead of you as an investor, you're in a prime spot to take some risks. Every little bit matters, too. Over long periods, the difference between 5% and 6% returns on a $1,000 investment can be thousands of dollars. For what it's worth, the S&amp;P 500 — an index of America's largest companies — has grown by about 8% a year over the past two decades.The long-term math favors shifting away from cash, and the short-term calculus is changing, too. Because the Fed started cutting interest rates in September, you're slowly losing that sweet, sweet savings rate — average money-market rates have slid to 2.75% from 2.9% at the end of July.Fellow millennials: As a market nerd who studies how the wealthiest Americans get rich, I'm begging you to stop playing it safe. Cash may feel like a warm, fuzzy blanket, but you're not getting anything done just lying there on the couch bingeing Netflix. Holding cash as an emergency fund or a house down payment makes sense. Staking your retirement on cash doesn't.Risk is the foundation of wealth-building, so get off the couch.Callie Cox is the chief market strategist at <a target="_blank" href="https://www.ritholtzwealth.com/">Ritholtz Wealth Management</a> and the author of <a target="_blank" href="https://www.optimisticallie.com/">OptimistiCallie</a>, a newsletter of Wall Street-quality research for everyday investors. You can view Ritholtz's disclosures <a target="_blank" class="" href="https://www.ritholtzwealth.com/blog-disclosures">here</a>.

Millennials are hoarding cash. That could hurt them in the long run.

<ul class="summary-list"><li>America's surging pile of debt means investors should focus on tax-saving investment strategies, according to Bank of America.</li><li>The US government has two options to tackle its debt pile: either raise taxes or accept higher inflation.</li></ul>America's fast-growing pile of debt suggests investors should start to focus on tax-efficient investment strategies, according to <a href="https://markets.businessinsider.com/stocks/bac-stock?miRedirects=1">Bank of America.</a>The bank noted that the $34 trillion in US debt is poised to exceed 100% of GDP by July, approaching its record 112% of GDP reached during World War II. And <a href="https://markets.businessinsider.com/news/bonds/us-debt-levels-fed-print-money-debasement-bank-of-america-2024-3">there are no signs of the pile of debt getting smaller</a> anytime soon, as about 90% of the government's budget rises automatically, according to the bank.Only 13% of government spending is non-defense discretionary, while the other 87% is "politically untouchable mandatory entitlement spending" like Social Security and Medicaid, defense spending, or net interest expense. So, how does it all end?"Not with drama or default, but with taxes or with the hushed acceptance of that universal tax: inflation," Bank of America's Research Investment Committee said in a note on Tuesday.That means looking forward, investors should prepare for either higher taxes or higher inflation, and in either scenario it makes sense to own stocks as the most tax-efficient strategy, according to the bank.Here are five ways to boost the tax efficiency of investment portfolios.<h3>1. Own ETFs over mutual funds</h3>"ETFs are more tax efficient than mutual funds thanks to the creation and redemption process for shares," Bank of America said. "Mutual funds are sometimes forced to sell assets to meet redemption requests. Any realized capital gains from sales are distributed to shareholders, triggering a tax event. On average, mutual fund tax events cost investors 1.3% per year vs just 0.4% for ETFs."<h3>2. Stocks are more tax-efficient than bonds</h3>"The income paid by US government bonds is taxable at federal ordinary income rates, up to 37% for top earners. Interest from cash accounts, I-bonds, and other fixed income is also taxable as ordinary income. Most equity payouts, however, are classified as qualified dividend income, and taxed at a maximum rate of 20%," Bank of America said.<h3>3. When owning bonds, focus on municipals</h3>For investors' bond allocations, it makes sense to focus on high-yielding issues in the municipal space, as well as preferred ETFs, which act as quasi-bond funds. These two types of fixed-income investments not only get taxed at lower rates than Treasury bonds, but they've outperformed both the US Aggregate Bond Index and Treasury bonds over the long-term.<h3>4. Stock buybacks are more tax-efficient than dividends</h3>"Investors looking for long-term wealth accumulation should favor buybacks over dividends," Bank of America said, arguing that buybacks offer "low-friction compounding.""Share repurchases are more tax-efficient than dividends. Even if dividends are qualified, payouts are taxed at the end of every year where they're received. An investor who pays taxes on reinvested dividends has less money to compound every year. Holding companies that execute repurchase programs do not typically trigger a tax event until an investor sells their shares," Bank of America said.<h3>5. Take a second look at your portfolio</h3>Investors should take a fresh look at their portfolio and audit the holdings to better understand their tax liability.Investment products that typically come with a lower tax bill include MLP ETFs, US sector ETFs, and international stock ETFs. In all three cases, taxes can be lowered thanks to tax-exempt return on capital distributions or qualified dividend income.

5 ways to lower your portfolio's tax bill as government debt bites, BofA says

Good morning. I'm senior editor Max Adams. There's a massive amount of cash on the sidelines right now as markets suffer through extreme bouts of volatility and investors remain skittish. Today we're taking a look at Bank of America's monthly survey of fund managers to see what's going on and what investors' cash positions can tell us about what the future might hold for the stock market. Let's get right into it.If this was forwarded to you, <a href="https://www.businessinsider.com/subscription/newsletter/10-things-opening-bell">sign up here</a>. Download Insider's app <a href="https://www.insider.com/app">here.</a><a href="https://markets.businessinsider.com/news/stocks/stock-market-outlook-cash-rally-capitulation-fed-policy-pivot-bofa-2022-10"></a>1. Investors' cash pile is the largest since April 2001. Why is that significant? Well, according to Bank of America's fund managers' survey, it "screams" capitulation. That's according to BofA chief US investment strategist Michael Hartnett, who writes that the October survey "screams macro capitulation, investor capitulation, and crucially start of policy capitulation." The survey shows that cash as a percentage of portfolios stands at 6.1%, a 21-year high. That's compared to a long-term average of 4.8%. So what does this mean?Investors are nervous. They're holding more cash to avoid deploying it into terribly volatile markets. The capitulation part of this suggests that these survey respondents think that a bottom may be in, and their next move will be to deploy all this cash they've amassed while markets were under stress. Which bring us to the next part of BofA's prediction — that this cash pile will fuel a rally in 2023. "We still say 'big low, big rally' when Fed cuts become consensus," Hartnett said, referring to the long-awaited pivot by the US central bank away from the big interest rate hikes that have battered the stock market this year. A big low is still coming, Hartnett said, which could cause the Fed to panic. For the time being, investors should be looking out for "tasty morsels" of another bear market rally if Treasury yields stay below 4%. The 10-year note on Tuesday was yielding around 4.05%.In other news:<a href="https://markets.businessinsider.com/news/stocks/netflix-stock-price-q3-earnings-subscriber-growth-advertising-sharing-ackman-2022-10"></a><div type="image" title="stranger things" height="598" width="1196" msid="94964425" hostid="261" sizebytes="51456"></div>2. Netflix stock surged as much as 14% premarket, after the streaming giant <a href="https://markets.businessinsider.com/news/stocks/netflix-stock-price-q3-earnings-subscriber-growth-advertising-sharing-ackman-2022-10">beat Q3 forecasts and returned to subscriber growth</a>. But US futures are seesawing as <a href="https://markets.businessinsider.com/news/currencies/dollar-pound-falls-uk-inflation-40-year-high-food-rises-2022-10">double-digit UK inflation reminds the market</a> about central bank hiking campaigns. Check out <a href="https://markets.businessinsider.com/premarket">the latest levels here.</a>3. Earnings on deck: Tesla, IBM, Procter &amp; Gamble and others are all <a href="https://markets.businessinsider.com/earnings-calendar">reporting. </a>4. High inflation and rising rates are bad news for US stocks, especially growth. A hard-landing scenario could see the S&amp;P 500 drop by another 14%, according to Goldman Sachs. <a href="https://www.businessinsider.com/stocks-to-buy-profitable-growth-picks-bargains-sales-goldman-sachs-2022-10">The bank named 22 profitable growth stocks that are set to turbocharge their sales and are trading at a bargain</a>.5. There's still time to lock in a near 10% interest rate on inflation-protected bonds from the US Treasury. I-Bonds have gained immense popularity this year given deeply negative stock market returns and high inflation. <a href="https://markets.businessinsider.com/news/bonds/how-to-invest-in-government-i-bonds-inflation-treasury-direct-2022-10">Here's how investors can buy I-Bonds before interest rates reset later this month</a>.6. One of Wall Street's biggest bulls is getting less bullish on stocks. JPMorgan's Marko Kolanovic cited the rising risk of a Fed policy error and escalation of Russia's war on Ukraine. <a href="https://markets.businessinsider.com/news/stocks/stock-market-outlook-risk-fed-hawkish-policy-error-marko-kolanovic-2022-10">He reduced exposure to equities in his model portfolio by 3%, and redistributed the allocation to government and corporate bonds.</a>7. The Biden administration is set to release more oil from the Strategic Petroleum Reserve. The next tranche will reportedly be 14 million barrels, the last of the massive SPR drawdown. <a href="https://markets.businessinsider.com/news/commodities/oil-gas-prices-biden-spr-release-midterms-millions-barrels-opec-2022-10">Biden wants to cool rising gas prices ahead of midterm elections in November, according to Reuters</a>.8. Investors seem less concerned about midterm elections than they have in the past, Goldman Sachs said. Just three weeks away, the elections will still likely have implications for areas of the stock market. <a href="https://www.businessinsider.com/where-to-invest-midterm-elections-strategy-stock-market-goldman-sachs-2022-10">The bank shared two sectors that have historically outperformed the most in the initial months following midterms</a>.9. Sentiment is unusually bearish as the crucial third-quarter earnings season gets underway, Wedbush said. But analyst Dan Ives still likes software and cybersecurity stocks. <a href="https://www.businessinsider.com/investing-stocks-to-buy-tech-rally-earnings-inflation-recession-wedbush-2022-10">Here are 12 of his favorite tech stocks to own heading into the end of the year</a>.<a href="https://markets.businessinsider.com/news/stocks/target-stock-price-walmart-ratings-upgrade-buy-inventory-economy-jefferies-2022-10"></a><div type="image" title="Target stock" height="1230" width="1404" msid="94964427" hostid="261" sizebytes="43378"></div>10. Target stock is more than 40% of its highs as excess inventories have weighed on profit margins. The retailer could get a jolt when earnings are due next month and as the holiday season also nears. <a href="https://markets.businessinsider.com/stocks/tgt-stock">Shares</a> could bounce 24%, said Jefferies, which cited its <a href="https://markets.businessinsider.com/news/stocks/target-stock-price-walmart-ratings-upgrade-buy-inventory-economy-jefferies-2022-10">ability to withstand a tough economic environment marred by inflation</a>.Keep up with the latest markets news throughout your day by checking out <a href="https://link.chtbl.com/therefresh">The Refresh from Insider</a>, a dynamic audio news brief from the Insider newsroom. <a href="https://link.chtbl.com/therefresh">Listen here.</a>Curated by Max Adams in New York. Feedback or tips? Email <a href="mailto:madams@insider.com">madams@insider.com</a>.

Investors' cash pile is the largest in 21 years. Here's what that means and why it could signal a rally is on the way in 2023.

<ul><li>US stocks fell on Thursday after a slew of economic data suggested a recession is coming.</li><li>Jobless claims, the Philly Fed Factory Index, and Leading Economic Indicators all had a weak showing.</li><li>Disappointing earnings from Tesla and AT&amp;T led to a 11% sell-off for both stocks.</li></ul>US stocks fell on Thursday as investors digested weak corporate earnings and a slew of economic data that <a href="https://markets.businessinsider.com/news/stocks/stock-market-outlook-jpmorgan-inflation-recession-warning-credit-crunch-fed-2023-4">suggested a recession is all but certain.</a><a href="https://markets.businessinsider.com/stocks/tsla-stock">Tesla</a> reported results that disappointed investors, <a href="https://markets.businessinsider.com/news/stocks/tesla-stock-elon-musk-price-cuts-market-news-model-y-2023-4">with the stock falling as much as 11%.</a> The company said its gross margin fell below 20% as it implemented a number of price cuts for its vehicles during the quarter. <a href="https://markets.businessinsider.com/stocks/t-stock">AT&amp;T</a> also reported earnings that fell flat with investors, sending the stock down as much as 11%.Meanwhile, weekly jobless claims jumped 5,000 to 245,000, slightly ahead of economist estimates of about 240,000. And the Philadelphia Fed Factory index reported another contraction in April, representing the eighth consecutive month of declines in manufacturing activity. Finally, the Conference Board's Leading Economic Indicators index showed a continued slide to levels last seen in November 2020, when the economy was still recovering from the COVID-19 pandemic."Historically, an economic contraction has closely followed a decline in the LEI of this magnitude. A recession is all but certain, so the more important question is if markets will hit new lows as the economy contracts. We think not," LPL's chief economist Jeffrey Roach told Insider.Here's where US indexes stood at the 4:00 p.m. ET close on Thursday:<ul><li><a href="https://markets.businessinsider.com/index/s&amp;p_500?utm_source=markets&amp;utm_medium=ingest%3Futm_source%3Dmarkets&amp;utm_medium=ingest&amp;utm_medium=ingest&amp;utm_source=markets" rel="">S&amp;P 500</a>: 4,129.81, down 0.59%</li><li><a href="https://markets.businessinsider.com/index/dow_jones?utm_source=markets&amp;utm_medium=ingest%3Futm_source%3Dmarkets&amp;utm_medium=ingest&amp;utm_medium=ingest&amp;utm_source=markets" rel="">Dow Jones Industrial Average</a>: 33,786.62, down 0.33% (110.39 points)</li><li><a href="https://markets.businessinsider.com/index/nasdaq_composite?utm_source=markets&amp;utm_medium=ingest%3Futm_source%3Dmarkets&amp;utm_medium=ingest&amp;utm_medium=ingest&amp;utm_source=markets" rel="">Nasdaq Composite</a>: 12,059.56, down 0.80%</li></ul>Investors now will turn their attention to next week's release of first-quarter earnings from mega-cap tech companies including Apple, Amazon, and Alphabet, among others. Here's what else happened today:<ul><li>Elon Musk <a href="https://markets.businessinsider.com/news/stocks/elon-musk-tesla-stock-economy-fed-rates-layoffs-credit-crunch-2023-4">expects the US economy to struggle for the next year</a> — and a toxic cocktail of higher interest rates, rising unemployment fears, and banks pulling back on lending to dent demand for <a href="https://markets.businessinsider.com/stocks/tsla-stock?utm_medium=ingest&amp;utm_source=markets" rel="">Tesla</a> vehicles.</li><li>The <a href="https://markets.businessinsider.com/news/stocks/us-economy-outlook-student-loan-moratorium-household-spending-biden-jefferies-2023-4">US economy is barreling toward a "student loan cliff"</a> as borrowers may owe $18 billion in monthly repayments once President Joe Biden's pause on higher-education loan payments ends later this year, according to Jefferies.</li><li>Investor pessimism toward Canada-based <a href="https://markets.businessinsider.com/news/stocks/toronto-dominion-short-bets-hit-61-billion-first-horizon-takeover-2023-4">lender Toronto-Dominion just hit a new high.</a> Bearish stock bets against TD – the most shorted bank in the world – surged to $6.1 million on Wednesday, marking a 45% increase from two weeks earlier.</li><li>Ray Dalio <a href="https://markets.businessinsider.com/news/stocks/ray-dalio-financial-system-restructurings-debt-principles-bridgewater-hedge-fund-2023-4">said debt levels have become unsustainably high,</a> setting up the financial system for major changes and that debts will increase so much that central banks will have to buy them.</li><li>The <a href="https://markets.businessinsider.com/news/bonds/i-bond-interest-raltes-drop-below-cash-yields-inflation-cools-2023-4">boom for I-Bonds appears likely to end</a> as the interest rates for the inflation-linked Treasury bond is estimated to fall to 3.8% in May as inflation continues to ease, making money market funds more attractive.</li></ul>In commodities, bonds and crypto:<ul><li><a href="https://markets.businessinsider.com/commodities/oil-price?type=wti&amp;utm_medium=ingest&amp;utm_source=markets" rel="">West Texas Intermediate crude</a> oil fell 2.64% to $77.15 per barrel. <a href="https://markets.businessinsider.com/commodities/oil-price?utm_source=markets&amp;utm_medium=ingest%3Futm_source%3Dmarkets&amp;utm_medium=ingest%3Futm_source%3Dmarkets&amp;utm_medium=ingest%3Futm_source%3Dmarkets&amp;utm_medium=ingest%3Futm_source%3Dmarkets&amp;utm_medium=ingest%3Futm_source%3Dmarkets&amp;utm_medium=ingest&amp;utm_medium=ingest&amp;utm_source=markets" rel="">Brent crude</a>, oil's international benchmark, dropped 2.74% to $80.84.</li><li><a href="https://markets.businessinsider.com/commodities/gold-price?utm_medium=ingest&amp;utm_source=markets" rel="">Gold</a> rose 0.37% to $2,014.80 per ounce.</li><li>The yield on the 10-year Treasury fell five basis points to 3.54%.</li><li>Bitcoin fell 2.62% to $28,111, while ether dropped 1.13% to $1,928. </li></ul>

US stocks fall as weakening data suggests recession coming for the economy

<ul class="summary-list"><li>A <keyword id="6354604" type="UNKNOWN" weightage="60" keywordseo="Chicago">Chicago</keyword> prisoner walked out of jail posing as a fellow inmate, wearing a face mask that let him cover his face tattoos, according to multiple sources. </li><li>Jahquez Scott left the Cook County Jail on May 2 instead of Quintin Henderson, who had been approved for release that day.</li><li><a href="https://www.chicagotribune.com/news/breaking/ct-defendant-released-after-swapping-paperwork-20200505-euwpyuat7nhsnc5aiboizypt54-story.html">According to the Chicago Tribune</a>, Henderson later told authorities that Jahquez promised him $1,000 to swap places.</li><li>Scott wore Henderson's sweatshirt and a mask to take Henderson's place when he was called up to leave, and is now still at large, <a href="https://www.youtube.com/watch?v=KrvJ9F7EJy8">according to CBS Chicago.</a> </li><li>Henderson has now been additionally charged with aiding and abetting an escape, the Tribune said. Authorities are trying to re-capture Scott.</li><li><a href="https://www.insider.com/?hprecirc-bullet">Visit Insider's homepage for more stories</a>.</li></ul>Detainees at a Chicago jail plotted an identity swap that saw one of them get out early, wearing a <keyword id="1754604" type="PERSON" weightage="60" keywordseo="coronavirus">coronavirus</keyword> face mask that covered his distinctive face tattoos.Jahquez Scott, 21, pretended to be another inmate and signed out of Cook County jail in disguise, <a href="https://www.chicagotribune.com/news/breaking/ct-defendant-released-after-swapping-paperwork-20200505-euwpyuat7nhsnc5aiboizypt54-story.html">according to the Chicago Tribune</a>.The newspaper said Scott got out by impersonating Quintin Henderson, who had been granted release on bail.Scott's bail conditions were much harsher than Henderson's.<a href="https://chicago.cbslocal.com/2020/05/05/authorities-cook-county-jail-inmate-switched-identities-with-another-inmate-was-released-from-jail-while-wearing-mask/">According to CBS Chicago</a>, Henderson was due to leave on an I-bond — a form of bail release based on signing an agreement to come to court.Scott was being held on a $50,000 bond on gun charges, and for violating an earlier bail, the station reported.Henderson, 28, told prosecutors on Tuesday that Scott approached him with a promise of $1,000 for his cooperation, according to the Tribune. The pair were recorded on surveillance camera in the discharge tunnel allegedly discussing the plot and swapping sweatshirts, the paper reported.At the time of the release, guards called Henderson's name but Scott stepped forward, in a mask.According to Cook County Sheriff's office, he used Henderson's inmate number and signed forms in his name before walking out, CBS Chicago said.Henderson then came forward claiming he had been asleep when his name was called, and asked when he would be released. The prison authorities quickly realised that something was amiss, the paper reported. Henderson has now been additionally charged with aiding and abetting an escape, with $25,000 bail, said the paper. A warrant is out for Scott's arrest.There is also an internal investigation at the prison, <a href="https://www.youtube.com/watch?v=KrvJ9F7EJy8">according to CBS Chicago</a>. Read the original article on <a href="https://www.insider.com/man-escapes-chicago-jail-by-swapping-places-wearing-coronavirus-mask-2020-5">Insider</a>

A Chicago inmate escaped jail by swapping places with another detainee and wearing a coronavirus mask so nobody saw his face tattoos

<keyword id="6354427" type="CITY" weightage="60" keywordseo="Apple">Apple</keyword> is <a href="http://www.businessinsider.com/apple-raises-17-billion-dollars-in-bond-offering-2013-4">borrowing $17 billion today</a>.
Demand for these "iBonds," as they are affectionately known, is off the charts. The scuttlebutt is that investors are so stoked about lending money to Apple that the size of the deal is affecting today's market for government bonds (which is absolutely massive--trillions of dollars).
Lending money to Apple certainly does seem like a safe bet, at least as far as lending money to any technology company goes.
But I heard on Bloomberg Radio this morning that some investors are complaining that Apple's long-term debt didn't get the highest possible rating from the rating agencies--"AAA." And someone else was suggesting that Apple's bonds are basically as safe as government bonds.
To the extent that there are actually folks out there who think that Apple's bonds are as safe as government bonds, I have a few charts for you.
The first chart shows the profits of global handset makers over the last five years. 
You will notice that two companies on the chart are doing very well--Apple and Samsung. They are doing so well, in fact, that some investors apparently think that the bonds of one of the companies, Apple, are as safe as U.S. government bonds.
But the line I want you to focus on in the chart is actually headed in the other direction. It's the purple line that started out high on the left and is now bumping along the bottom.
That line is Nokia.
<div class="image-container click-to-enlarge" style="width:620px"><div class="image"><a title_source="Business Insider Intelligence" title_caption="" class="zoomin" href="http://static2.businessinsider.com/image/50b4e7eaecad043d06000006-960/slide-122.png"></a></div>Business Insider Intelligence</div>
Five years ago, when I wrote a post suggesting that Nokia might want to worry a bit more about the iPhone, some readers ridiculed me. Oh, you silly little American boy, the cat-calls went, you and your cute little Apple can't even begin to understand how dominant Nokia is worldwide. Nokia is mobile phones. Nokia will crush Apple. Etc.
Keep that purple line in mind and then check out this next chart.
This next chart is the chart of a formerly red-hot gadget company called BlackBerry. Five years ago, everyone thought BlackBerry would take over the world. Now the stock is trading in the teens. 
<div class="image-container" style="width:620px"><div class="image"></div>Yahoo Finance</div>
And now here's a chart of Palm, another formerly red-hot gadget company.
<div class="image-container" style="width:620px"><div class="image"></div><a href="&lt;a href="></a>"&gt;Yahoo Finance</div>
You get the point.
The point is this:
There's really no such thing as "long-term investing" in technology. At least not when "long-term" is defined in terms of decades and not years.
In only 6 months, Apple has already gone from being on top of the world to being mired in the midst of a massive collapse. The stock has fallen from a high of $702 in September to a recent low of $385.
And that's 6 months.
A year or two down the road, Apple might have completely recovered. Or it might actually be in real trouble.
And 10 years down the road?
10 years is so long in the technology industry that it's barely even worth contemplating.
And 30?
If you think lending money to Apple for 30 years is perfectly safe, here's another example to keep in mind:
25 years ago, Apple was on top of the world (for the first time).
Then, 15 years ago, only 10 years after being on top of the world, Apple almost went bankrupt.
You can make all the jokes you want about how the U.S. government is running an unsustainable budget deficit and that the country's broke, etc. But the U.S. government has something that even Apple will never have: A money printing press.
Unless the world completely goes to hell, in which case we have other things to worry about, the U.S. government will pay back its debts, even if the value of the dollars that it pays them back in has collapsed.
Will Apple be financially healthy enough to pay back its debts in 30 years?
We shall see.
It might be healthy enough.
But there's a distinct possibility that it might not be.
And anyone who tells you otherwise should take a look at the charts above.
SEE ALSO: <a href="http://www.businessinsider.com/apples-stock-price-2013-4">The Bull Case For Apple</a>
Disclosure: A couple of weeks ago, I <a href="http://www.businessinsider.com/i-just-bought-apple-stock-2013-4">bought Apple stock.</a>

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