Is Investing in Treasury Bills a Wise Financial Move for 2023?

Title: Is Investing in Treasury Bills worth it in 2023?

Are you familiar with Treasury Bills? They’re a kind of short-term loan you give to the U.S. government. Also known as T-bills, the government uses them to fund various public projects like building schools and roads, or maintaining the armed forces.

How does it work? You buy a T-bill at a discounted price, and when it matures, you get back its full value. You don’t get interest, but the difference between what you paid and what you get back is your profit. For instance, if you buy a T-bill with a 5% discount and a face value of $1000, you pay $949.44 upfront. After a year, you get back $1000. That’s an annualized return of 5.35%.

You can buy T-bills from the TreasuryDirect website or through a bank or online brokerage. Many have filters that let you sort them by term, auction date, and more to find the one that suits your needs best.

Wondering if T-bills are a smart investment? They normally are. They are super safe because they’re backed by the U.S. government. If you’re planning a big purchase within a year and want your money to grow until then, T-bills could be a good choice. But let’s be clear: withdrawing them before maturity isn’t the ideal move because you might lose some of your profits or have to pay a penalty.

If you compare Treasury Bills with Certificates of Deposit (CDs), both are pretty safe, give you better returns than usual savings accounts, but have their pros and cons. T-bills are more flexible with terms ranging from 4 to 52 weeks and usually don’t have fees if you cash out early. However, they’re not as liquid as a savings account. CDs provide higher yield than T-bills, but they’re less liquid and have withdrawal penalties.

Our recommendation? If you want higher yields than saving accounts and good liquidity, go for T-bills. If you’re planning a big purchase and want your money to grow safely, short-term T-bills can be the best option.

T-bills historically have performed better than dividend stocks in the short run, but they’re more limited in growth. Of course, T-bills won’t make you a millionaire – but they do stabilize your portfolio.

How can you buy T-bills? Simply visit the TreasuryDirect website, create an account, and choose a T-bill that suits your needs. Or you can use a broker. This route gives you more liquidity, but you’ll have to consider the brokerage fees.

What makes T-Bill rates increase? It’s mainly due to economic growth. When the economy is doing well, other investments like real estate and equities offer higher yields, and the demand for T-bills drops. So, T-bills have to offer higher yields to attract investors.

According to Goldman Sachs Group experts, the 10-year yield for T-bills in 2024 will be a bit above 4%. However, remember that these are just predictions and the actual performance may vary.

Are T-bills taxable? Yes, any earnings from T-bills are federally taxable. However, they are exempt from state and local taxes, making them an attractive option, especially if you live in a high-tax state.

In conclusion, T-bills are an excellent way to add stability to your portfolio. They add a small profit over a short period, and if you stagger your T-bills with different maturity dates, you can have a steady income throughout the year.

Are T-Bills a risky bet? Not at all! Given they’re backed by the U.S. government, T-bills are often used as a benchmark for zero-risk investments. So, are they safe to buy now? Absolutely! Depending on the market conditions, however, you might want to consider other higher-yielding investments.