DETROIT, Mich.-Dan Pederson is used to the jokes and he doesn't mind. He knows that looking over the decade of the `90s, mutual funds have out-performed other investment vehicles by a wide margin. But he also knows that United States Savings Bonds are still one of the most widely-held securities in the world, with some $180 billion currently held by investors. They also are being overlooked, misunderstood, often forgotten and right now, about $6 billion worth have reached maturity and have stopped earning interest. Some may be hidden in Grandma's bureau drawer, and that's not a good place, advised Pederson. Savings bonds? The tortoise investment of the savings industry is offered through nearly 40,000 organizations, companies and government agencies, including many credit unions. "When the stock market plunged last week (April 14) the folks who were divided into the Tortoise and the Hare groups could see the value, once again, in having a diversified portfolio-including safe, conservative investment choices-a full mix. The Tortoise had his day," said Pederson. Pederson, who makes no boast about being an investment specialist, says he's only an expert in one thing, and that's U.S. Savings Bonds. "It's a conservative investment choice. But I'd say that half my business is serving financial planners themselves, because they call me to ask about how to handle their clients' bond holdings. If the usual percentage of what portion of money that should be placed in safe vehicles is 10% to 20%, I recommend U.S. Savings Bonds." Why? Because their interest rate is competitive with other safe investments like CDs, marketable treasury securities and money markets, said Pederson. Right now, the Series EE bond is paying 5.19%, and Pederson predicts that on May 6, when the next adjustment is made (rates change every six months) it'll go up one-half point. The Inflation Index (Series I) Bond, now paying 6.98% will rise too. The other advantages of bonds are well-known, he said: tax deferred until fully matured or cashed-in. Pederson is a former Federal Reserve Supervisor (Chicago), who advises American Express A.G. Edwards and Merrill Lynch, to name a few of his clients. He said that savings bonds are more complicated than most people think. And don't go looking to a bank for good advice on bonds, either. They are among the worst, according to one survey, giving out incorrect information about how long it takes for a bonds to reach face value at the guaranteed rate. Pederson heard it all at the Federal Reserve: questions about maturities, different interest rates, compounding and tax questions. In 1990, he formed The Savings Bond Informer Inc., which provides statements and analyses of Savings Bonds and offers consulting services and seminars. He is also the author of what has come to be recognized as the Bible of the industry, "Savings Bonds, When to Hold, When to Fold and Everything In-Between." The book outlines the costliest mistakes people make with bonds and how to avoid them. The biggest mistake people make? Believe it or not, it's not recording and tracking their bonds.Pederson offers a free statement that puts all the vital information in one place. To get it, call (800) 927-1901. The next worst mistake is squirreling away bonds, letting them mature and losing interest. Sounds funny, but Pederson knows of heirs who discovered bonds after the death of a loved one that had matured years prior. In one case, as much as $15,000 in interest was lost. The government is not obligated to inform bond owners when bonds mature. -
caburger@cutimes.com
