Treasury Securities As A Way To Invest Your Money
Buying U.S. Treasury Securities As A Way To Diversify Your Investments
If you are new to investing, you may want to look for ways to invest within a reduced risk format. Good news: There are low-risk and risk-free investments available to everyone. We recommend that you check all options with your financial advisor… One of the safest is:
Treasury Securities. The U.S. government sells securities to raise the money it needs to pay off debt. There are many positives to purchasing Treasury securities.
Because they are backed by the government, which guarantees principal and interest will be paid on time, many consider Treasury securities to be free from risk. Most Treasury securities are liquid, or easily sold for cash, which should be a consideration if you think you might need to access the money you have tied up in them. What’s more, the interest earned on Treasury securities is exempt from state and local income tax, making Treasuries that much more attractive for those hoping to make money on their investments without substantially impacting their tax liability.
You can invest in various types of Treasury securities, including:
- Treasury bills, or T-bills. T-bills are short-term securities you buy at less than face value, determined at auction; when your T-bills mature (in less than one year), the government pays you face value for them. You can also sell T-bills at market value before they mature.
- Treasury Notes and Bonds. These pay interest every six months and, like T-bills, can be sold any time at market value, whether they’ve matured or not. If you hold them until maturity, the government will pay you face value for your Treasury notes or bonds. Treasury notes mature between one and ten years from date of issue, while Treasury bonds mature more than ten years from their issue date.
- Treasury Inflation-Protected Securities, or TIPS. TIPS pay interest every six months; their principal value is adjusted for inflation according to the Consumer Price Index. The government determines TIPS’ interest payments and maturity value according to that inflation-adjusted principal.
- Electronic or Paper EE Bonds. EE bonds pay a fixed rate of return. You can purchase electronic EE bonds for face value and sell them for face value anytime after one year later. Paper EE bonds, on the other hand, can be purchased for half of face value, but you can’t sell them for face value until they have matured. If you sell your EE bonds less than five years after the purchase date, you’ll forfeit the last three months’ interest.
- “I” Bonds. Both paper and electronic, “i” bonds are purchased and sold at face value. Like EE bonds, they pay fixed interest. If you sell them less than five years from the date of purchase, as with EE bonds, you’ll lose your last three months’ interest.
There are other types of low-risk investments out there, but only you and your financial advisor can determine which “safe” investments are right for you!!! We invite you to browse AllFinancialAdvisors.com to find a financial advisor that can meet your needs and help you determine whether low-risk investments should be part of your financial plan right now. Thanks for visiting AFA!
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