How to utilize treasury securities as part of your investment strategy
This year, I’ve been thinking a lot about my investment strategy. My net worth is heavily tied to stocks, and it hurts to see my net worth nose-dived. I’m definitely going to hold on to them but I want to allocate my cash to somewhere safe that can give me some decent return until I’m ready to invest in riskier assets again.
Disclaimer: I’m not a financial advisor, nor this is financial advice by any means. Just want to share my experience.
What is TreasuryDirect?
TreasuryDirect is the one and only place to electronically buy and redeem U.S. Savings Bonds. They offer electronic sales and auctions of other U.S.-backed investments to the general public, financial professionals, and state and local governments.
You can read more here. It’s the website where financial institutions, government agencies, and even other countries purchase billions of dollars worth of U.S. securities every year. Individuals like us can buy there too!
Once you sign into the website, you can see all the available options listed here.
My current strategy: Savings I Bonds, Bills, and Bonds.
Savings I Bond
At the time of the writing, the yield is 6.89% (reference). This is pretty darn good given that a high-yield savings account like Wealthfront gives 3.80%. Also, note that these treasury securities are exempt from state and local taxes (source). There are some caveats though: there are a limit on how much you can purchase and the penalty (3 months of interest) on early withdrawal after one year (reference). You can’t cash out for one year so be aware of that.
Bills
Oh, I like this one because they mature (expire) early. I basically use them as my savings account. You can check all the rates. Honestly, it’s not that different from what a high-yield savings account offers, but a smaller yield still matters if you have lots of cash. Remember, it’s exempt from state and local taxes. California tax is HIGH. At the moment, the rate is between 3.77% and 4.55%. Slightly better than high-yield savings.
Bonds
I’m experimenting with the bonds. I have some money in long-term bonds and planning to sell them when the interest rates go down. The selling process is interesting but a little complicated but as an individual, you can do it (reference). I thought financial institutions are only the ones who can do it.
What’s your investment strategy? I’d be interested to see yours as well. Please comment here!
Thanks for reading! Hope you enjoyed this article. Feel free to follow if you’d like. Otherwise, have a good day!
Live life to the fullest,
Stephen S. Lee
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