T Bills are ultra-short-term treasury bonds backed by the full faith and credit of the U.S. government. Here we’ll check out the best T Bill ETFs to buy treasury bills.
// TIMESTAMPS:
00:00 - Intro - Why T-Bills?
02:10 - SHV
02:35 - BIL
03:02 - GBIL
03:26 - CLTL
03:50 - SGOV
04:19 - Conclusion
// SUMMARY:
T Bills, short for treasury bills, are just ultra-short-term bonds from the U.S. government. These short bonds with maturities of less than a year are called bills. Because they’re backed by the full faith and credit of the U.S. government, they possess no liquidity risk, credit risk, or default risk inherent of corporate bonds. As such, T Bills are quite literally the “risk-free asset,” as they’re called. These special, seemingly boring bonds are considered a “cash equivalent.”
At this point you might be thinking this all automatically means negligible returns from treasury bills, but you’d be wrong. Their annualized historical return from 1928 to 2020 was 3.32%. The average rate of inflation over that period was 3.02%, which means a real return (return adjusted for inflation) of 0.3%.
T Bills are sold at a discount and don’t pay a coupon like most bonds, so they simply return their face value at maturity. The difference between your purchase price and that face value is your “interest.” Because they’re able to be rolled quickly, T Bills are also a decent inflation hedge. T Bills essentially kept pace with inflation during the double-digit inflation of the 1970’s in the U.S.! T Bills are a great place to park excess cash to be used for near-future liabilities so that you don’t lose that purchasing power to inflation.
This might sound crazy, but there have also been extended periods where T Bills outperformed the stock market: the 15 years from 1929 to 1943, the 17 years from 1966-82, and the 13 years from 2000-12. Any purveyor of market history will recognize these periods as being pretty abysmal for stocks. Stocks and treasury bonds tend to be inversely correlated, meaning when stocks zig, bonds tend to zag. Specifically, treasury bonds are a “flight to safety” asset that investors flock to during stock market turmoil or uncertainty.
Now that you know why treasury bills are attractive for a variety of purposes and audiences, let’s check out the best T Bill ETFs with which to buy them:
- SHV
- BIL
- GBIL
- CLTL
- SGOV
Read the blog post here: www.optimizedportfolio.com/t-...
#investing #tbills #bonds
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Disclaimer: This is not financial advice, investing advice, or tax advice. The information presented is for informational, educational, and entertainment purposes only. Investment products discussed are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here: www.optimizedportfolio.com/te...
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24 июл 2024
