Long Term Government Bond

The phrase 'long term investments' refer to investments at the time scale of between five and thirty years. The U.S. Treasury offers bonds which are medium to long term debt instruments in order to raise money for social programs or infrastructure development. A debt instrument is a document that is legally enforceable evidence of a debt and the promise of its timely repayment such as bonds, certificates of deposit, debentures, and promissory notes. When the government issues bonds, they are basically asking the public for a loan, and the bond itself is the contract for the repayment of that loan.

Treasury bond notes have terms of two to ten years, while bonds have terms of over ten years. The term of the bond (or note) denotes the time at which the entire amount of the bond will be paid back to the investor. Most bonds pay interest to the investor during the life of the bond, although some bonds take the interest and re-invest it and pay it with the principle at the end of the term. When a bond finishes its term, it is said to have matured.

Although stocks generally earn higher interest (dividends) during a long period of time, government bonds are far more secure. A company can go bankrupt, but not a government; so a bond will earn less than a comparable stock, but the investor can be sure of the bond's continuing interest payments and that the full amount will be paid back at the bond's maturity.

Two of the long term bonds available from the government are the Series EE bond and the Series I bond. Series EE bonds earn a fixed rate of interest that does not change due to economic inflation, or due to a rise or drop of general interest rates. They are sold at face value or at a discount. The I bonds, or inflation indexed bonds, have features that make them attractive to many investors. The interest that they earn is a combination of a fixed rate and a variable rate; the variable interest rate is recalculated every six months in light of the inflation rate. If the inflation rate goes up, so does the interest payment.