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The American government put a lot of effort into convincing the American populace to purchase WWII bonds. But did American citizens have good alternatives for investment during the same years? For example, was it more lucrative to purchase stocks or non-government bonds instead?

Or perhaps war bonds were a good deal and the government only needed to convince the populace to consider investing in the first place?

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    In hindsight, it would have been more lucrative to buy stocks as the market went up over the course of the war. But you can't really compare the two directly because stocks have lots of risk and bonds have a theoretically guaranteed return. Also consider that before the days of etrade, it was much harder to invest in the stock market than to buy a war bond. – Gort the Robot Apr 23 at 14:02
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    this indicates that in 1942, you paid $4 + 1% for any stock purchase. The cheapest war bond cost $18.75 and returned $25. The fee on an $18.75 stock would have been $4.18, or almost 25% of the value. Note that a day's wages for an average person was around $2.50, so $18.75 is the equivalent of around $1200 today. – Gort the Robot Apr 23 at 14:21
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    There is also the fact that if you didn't buy war bonds, your other investments might end up performing very poorly, if the war didn't go so well. – JasonB Apr 23 at 17:36
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    Terms like 'good' or 'better' are subjective. War bonds were expected to give a return that exceeded inflation (and so were 'better' than keeping cash under the mattress), and they weren't expected to go up in smoke in the next financial crash. Was that a 'good' investment? Did it give a 'better' return than, for example, owning a portfolio that included stock in Krupp over the same period? – sempaiscuba Apr 23 at 18:23
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    @davidlol I said they were expected to give a return that exceeded inflation. The fact that they didn't achieve that return is the main reason that the maturity yield for Series-E bonds was increased in 1957 and again in 1959. The original maturity yield had been set by the Treasury Department in 1935. All of which nicely illustrates my point about the terms being subjective. – sempaiscuba Apr 23 at 19:17
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In investing, its all about risk vs. reward. For that reason there's generally no such thing as the "best" investment. Different people have different investment goals.

US Savings bonds specifically have a reputation for being the world's safest possible investment, as they are backed by the longest-running sovereign government in the world, and at the time had only had minor technical defaults twice in 200 years*. One would imagine that was rather appealing to a lot of folks coming off of the Great Depression, where banks and companies were dropping like flies, taking their investors with them.

Of course due to that reputation, they don't have to offer a super competitive return. So if you don't mind the extra risk, you can always find a better return elsewhere than US Savings bonds. But if for you the alternative is keeping your life's savings in cash because it's the early 40's and you don't trust institutions, US Savings Bonds were a much better (both safer and better interest) investment than that.

The moral dimension of investing shouldn't be ignored either. There will likely be a world after we go, and it will tend to have more and better of things that we chose to invest in.

Most Americans at the time were not military age men. Investing money in the US government at the time was seen as a very real and effective way for men and women past military age (or otherwise ineligible) to contribute to the war effort, by allowing the government enough resources to keep the fighting men better fed and equipped.

* - In both of those cases, it was a refusal to redeem in gold, as the bonds initially stipulated, not a total default. There was a third incident in 1979 where the payments came late.

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    The United States is not the longest-running government in the world, and it wasn't in the 40s either. The real magic behind the legendary creditworthiness of the US treasury today comes from a mix of the US's titanic economic output and the status of the dollar as the world's reserve currency (meaning that we can print more of it to pay our debts without worrying too much about inflation). Neither of those two conditions existed at the time of WW2. – Brian Gordon Apr 24 at 6:47
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    @BrianGordon - This would be a good question here, and it is a debatable statement, but the US is certainly one of the contenders at the absolute least. Paul Ryan got pushback on a similar statement in 2016, and when Politifact looked into it, they again found the proposition debatable, but in the end rated it true. – T.E.D. Apr 24 at 12:18
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    Oldest democracy isn't the same as longest running government. It's hard to argue that the UK doesn't have a significantly longer-running government, especially if you look at Parliament as the enduring feature. – Gort the Robot Apr 24 at 17:29
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    @StevenBurnap - Check the first link I posted in the comment (2nd and 4th columns in particular). The Acts of Union that formed the UK were signed in 1800. Honestly, I thumbed through that whole list before posting such a bold assertion. – T.E.D. Apr 24 at 17:52
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    That Acts of Union are a decent argument for the UK not existing prior to 1800, but the government that ran the UK in 1805 was the same one that ran Great Britain in 1795 in all essential matters. If the US and Canada merged by simply seating selected members of the Canadian Commons and Senate in the US house and senate, without changing anyone in the executive branch, no one would say it was a "new government" – Gort the Robot Apr 24 at 19:26
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The US savings bonds marketed as "war bonds" during World War II were the Series E bond, which guaranteed a return of 4% 2.9%.

Here is a table summarizing annual returns on stocks and bonds since 1928, based on Federal Reserve data. The S&P 500 was negative for the years 1939-1941, but increased roughly 20-35% per year in 1942-1945. Keep in mind that index funds were not yet available to retail investors, and this was not so long after the Great Depression had shown the general public the risks of the stock market. Based on the first census of stock ownership on the New York Stock Exchange taken in 1952, we can safely assume that no more than 4% of the US population at most owned stock during the war years.

So T series bonds may be a more relevant point of comparison. Yields on these bonds were over 4-5% in 1938-1940 but fell to -2% in 1941 and remained less then 4% than 2.9% for the rest of the war. So over the period of the war as a whole, the returns on E series bonds were higher lower.

In sum, I would say that from a purely financial perspective, E series "war bonds" would have been a reasonably attractive option, especially for the risk averse individual investor. However, as is typically true of bonds as an investment class, they would not bring long-term returns as high as a portfolio of stocks less attractive than T bonds or stocks.

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    The guaranteed 4% claim on Wikipedia is wrong for series-E bonds issued during the war. Prior to 1959, those bonds were subject to a 2.9% maturity yield. See the Senate Finance Committee report on Interest Rate on Series E and H U.S. Savings Bonds p2. The 4% guarantee on series-E bonds was brought in much later. – sempaiscuba Apr 23 at 16:36

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