Don’t Discount the Investment Appeal of U.S. Treasury Bonds

June 5, 2019

You want to know what has always scared me away from investing? The cost. Of course, there is the whole matter of researching prudently enough to even pick the right stock or company to invest into in the first place. However, there is also cost. Investment isn’t a lottery or a get-rich-quick scheme. It can take years or decades to fully realize appreciable returns on investment. In my mind, I always believed that you need to invest thousands, or tens of thousands of dollars, to make worthwhile investments.

That is not necessarily true. You can begin investing with as little as $5 nowadays. For example, you can invest in penny stocks. Still, penny stock companies are very new or in imminent danger of closing, hence their pricing. You can invest with minimal capital via a robo-advisor or one of those spare-change investment apps like Acorn. There are many discount broker firms that can help you buy strategically cheap stocks. You can also invest into your own retirement fund at work.

However, all investments carry a degree of risk. I can’t stress enough that new investors are more prone to losing their investments than more experienced investors. One investment instrument that I am learning is more reliable in guaranteeing returns than others is the debt security. One such debt security that I recommend you invest in is United States Treasury bonds

U.S. Treasury Bonds 101

U.S. Treasury bonds are debt securities that offer maturity rates that can last for 10, 20, or 30-years. When you buy a U.S. Treasury bond, you are lending the American government money to pay for its federal expenditures. Owning a U.S. Treasury bond is considered by many financial experts to be a virtually risk-free investment. The maturity date of a Treasury bond refers to the date when it stops generating interest.

For example, a 30-year Treasury bond offers an interest rate of about 2.53%. Interest is added to the value of a Treasury bond twice a year. If you hold onto the bond for 30 years, you can cash it for its face value plus over 30-years of accrued interest. U.S. Treasury bonds are virtually guaranteed because they are backed by the United States government and the Department of the Treasury. The American federal government, and the Treasury, has the power to raise taxes and print fiat currencies. So, as long as the United States government stays solvent, your investment, or loan if we’re being honest, is guaranteed to be returned.

Getting Started

Your first step in learning about U.S. Treasury bonds should be to check out Treasurydirect.gov. You can buy Treasury bonds directly from the Department of the Treasury through this website. U.S. Treasury bonds are sold through an auction process. The minimum face-value of a Treasury bond is $1,000, although you can bid on them in $100 increments. You can also buy U.S. Treasury bonds on the secondary market.

Banks and Treasury bond brokers have connections to people who sell their bonds amongst themselves. However, if you are going to buy a treasury bond, it should be as a long-term investment. The available interest is modest but avails a much surer investment return than any hot stock tip.

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