A once boring fixed-income asset getting its time in the limelight this year as inflation hits a 40-year high can also offer stable returns to young investors looking to save and cushion their portfolios. Investments in the U.S. Treasury’s Series I savings bonds have surged this year as prices climbed and so far show few signs of easing. With the S & P 500 down 20% and more uncertainty ahead, investors say the inflation-hedging Treasury bond offers a guaranteed return to those willing to lock up their money for a minimum of one year. I bonds offer holders a standard fixed rate together with a variable rate that shifts every six months, the latter depending on the latest consumer price index numbers. Those who get their orders in today, Oct. 28, to give the Treasury Department time to process orders, lock in a 9.62% rate for the next six months . Demand for I bonds has skyrocketed in 2022 along with headline inflation, with the Treasury saying it issued $1.95 billion worth of I bonds in the week that ended Wednesday, and it may struggle to fulfill those orders before the new rate hits. That’s roughly double what it issued during the entire 2021 fiscal year. Come Nov. 1, that guaranteed rate is widely expected to sink to 6.48% , but fund managers say I bonds are still a worthy place to park cash, offering better returns than CDs and savings accounts. “It’s this great bedrock and if you can get your principal back, there’s nothing else like it,” said Bill Sweet, chief financial officer at Ritholtz Wealth Management. While capped at a maximum annual investment of just $10,000 a year, Sweet views the guaranteed return as a risk-free way that younger investors can save for a down payment, a wedding, or even beef up savings for further down the road. I bonds also offer a slew of tax benefits. Holders aren’t charged state or local taxes and it’s tax-free for certain educational uses. The maturity for the bond is 30 years and investors can choose to realize that interest annually, which could prove beneficial for those expecting to move up the tax bracket, said Sam Millette, fixed income strategist for Commonwealth Financial Network. Weigh the drawbacks While the return on I bonds seems attractive on the surface, investors should also consider some downsides , first and foremost that holders are locked into the bond for at least a year. Those who cash out within five years are also forced to forgo their last three months of earned interest. Locking up money in a bond may also prevent some investors from getting in on other short- or long-term opportunities that present themselves, said Dan Herron, a certified public accountant and certified financial planner based in California. Many of Brenna McLoughlin’s clients are maxing out I bonds for themselves and family members. Even putting a few thousand dollars in the bond could offer a decent cash cushion for times ahead, she said. “For a younger person who has $25,000 in cash and they need $20,000 of it to be completely liquid, maybe buy $5,000,” said McLoughlin, a senior advisor and certified financial planner at Wealthstream Advisors. “Even at that, you’re still getting a very attractive interest rate. In dollar terms, it might be modest but it’s still a win.” And for young investors who went all in on last year’s’ meme-stock craze or those more reluctant to dive in because of the risk, it’s one way to find stability, says Paul Schatz, founder and president of Heritage Capital. “As much as they raced in with the stimulus checks — the whole meme craze — now, I think they’ve gotten bloodied and bludgeoned and they’re looking for a little more safety and certainty,” he said. While a safe haven for cash, I bonds are not an alternative to investing, McLoughlin said. Despite the market’s dismal performance this year, equities offer much better returns for those with longer time horizons, she said. “Certainly a mix of stocks and bonds will be a better strategy for the long term,” she said.