If you are searching for a safest investments options, treasury bills or T-bills came first on the list. Issued by the US government itself, they are widely considered as secured and straightforward investment options. If you are searching for “how to buy treasury bills” online, this article is here to provide a walk you through the process.
What Are Treasury Bills?
Treasury bills are short term government issued security bonds. They are sold by government on a discounted price and offered fully value upon its maturity. The difference between the purchased price and redeemed price (face value of the treasury bill) is your profit.
Maturity period of t bills ranges between few days to maximum One year. Since they are backed by the government itself, they are considered a very low risk investment options.
Why Invest in Treasury Bills?
There are various reasons to consider for investing in T-bills. Here are some key reasons:
- Low Risk: Backed by U.S. government makes it low risk investment options.
- Guaranteed Returns: Return of your investment is guaranteed and you know them upfront.
- Flexible Terms: You can choose the investment term from multiple short term maturity options.
- Liquid Investment: You can easily sell them before maturity if needed.
How to Buy Treasury Bills?
Purchasing/Buying T-bills are easier than you might think. Below are the steps to buy t bills:
Open a TreasuryDirect Account
The first step in how to purchase t bills is to visit the official U.S. treasury buying platform i.e. TreasuryDirect and open your account here.
Go to TreasuryDirect.gov.
Click on “Open an Account.”
Provide your details like name, Social Security number, and bank account information.
Choose the T-bill Type
Treasury bills are offered in various maturities:
- 4 weeks
- 8 weeks
- 13 weeks
- 26 weeks
- 52 weeks
You have to pick the term that fits your financial goals.
Decide the Purchase Amount
You can buy T-bills in increments of $100. Decide how much you want to invest. Remember, the investment starts from $100.
Select a Buying Method
You can purchase treasury bills using below two methods:
- Non-competitive Bid: You accept the yield set during the auction. This is simpler for most investors.
- Competitive Bid: You specify the yield you want. However, this may lead to your bid being rejected if it doesn’t match the market rate.
Make the Purchase
Once you decide the investment amount and maturity term, log into TreasuryDirect account and place your order. Payment can be made using your linked bank account.
How to Buy T-Bills Through a Broker
If you don’t want to use TreasuryDirect for buying , the alternate way to buy treasury bills is through a brokerage account. Here’s how:
- Visit brokerage firms like Fidelity, Charles Schwab, or Vanguard and open an account with any one of them.
- Search for Treasury bills in their fixed income section.
- Once you decide the investment amount and maturity term, place an order.
Brokerage platforms may charge small fees against these transactions.
How Do T-Bills Earn You Money?
T-bills are sold at discounted price. For example, you might buy a $1,000 T-bill for $950. At maturity, you receive the full $1,000. The $50 difference is your profit.
The longer the maturity period, the higher the potential return.
Tax Benefits of T-Bills
One advantage of T-bills is their tax treatment. While you pay federal income tax on your earnings, they are exempt from state and local taxes. This makes them an attractive option for investors in high-tax states.
Risks of Investing in T-Bills
Although T-bills are low-risk, they are not entirely risk-free.
- Inflation Risk: The return may not keep up with inflation.
- Opportunity Cost: Other investments may offer higher returns.
- Liquidity Risk: Selling T-bills before their respective maturity may result in lower yields.
You need to understand these risks before investing.
Who Should Invest in T-Bills?
T-bills are ideal for:
- Beginners who are looking for a safe investment options.
- People saving for any short term goals.
- Investors seeking stable investment returns.
If you want to save your money securely for a short period, T-bills are a great choice.
How to Track Your T-Bill Investments
TreasuryDirect makes it easy to track your investments. You can simply log in to your TreasuryDirect account to view your holdings, maturity dates and interest earnings.
If you are using a brokerage platform, you can track your treasury bills through their platform.
Disclaimer: The information provided in this article is for educational purposes only and does not constitute financial advice. Stocks mentioned are examples and should be researched thoroughly before making any investment decisions. Always consult with a financial advisor or conduct your own due diligence to understand the risks involved in investing.
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