Why is this is better than an ETF treasury fund, CDs, and high-interest savings accounts?
Answer: Treasury Bills "interest" is state & local tax-free on the money earned. So if you're in a high-income tax state and city they're worth it.ETF fund aren't always 100% in treasuries and charge fees.
Question (asked a dozen or more times in the thread) : How does bill interest work?
Answer: Treasury Bills "interest" is the difference between face value and purchase price. You buy a $10k bill at less than $10k, upon maturity, it is worth $10k. The difference between purchase price and maturity value is your "interest."
Tax Equivalent Yield Calculator For Savings Bonds, Treasury Bills, and Tax-Exempt Money Market Funds
https://www.mymoneyblog
How Buy and Sell Treasury Bills
https://thefinancebuff.com/treasury-bills-cd-money-market.html
When are the auctions? When can I place an order?
4, 8, 13, 17, and 26 week bills are auctioned every week.
52 week bills are auctioned every four weeks.
You can see recent results and the planned schedule at: https://www.treasurydir
4 and 8 week bills are usually announced on Tuesday, auctioned on Thursday, and settle on Tuesday.
17 and week bills are usually announced on Tuesday, auctioned on Wednesday, and settle on Tuesday.
13 and 26 week bills are usually announced on Thursday, auctioned on Monday, and settle on Thursday.
52 week bills are usually announced every 4th Thursday, auctioned on Tuesday, and settle on Thursday.
At a brokerage, you can usually can place an order between the announcement and auction.
At TreasuryDirect, you can place an order up to about 8 weeks in advance.
Top Comments
Treasury BILLS are currently paying over 5% for various maturity lengths under 1 year. These can be bought through most brokerages even without a TreasuryDirect account.
Treasury BONDS are paying 4% or less and have 20 or 30 year terms.
The 4 week bill ordering opens tomorrow 8/8, the deadline to buy it is sometime Thursday 8/10 morning depending on where you are buying it and it settles on 8/15.
On TD Ameritrade, they take your money on the 10th (take it out of the money you can trade with when you hit purchase which can be as early as the 8th) and buy the bill on the 15th during time which you earn no interest. Thus the reason that I stopped buying 4 and 8 week bills at auction. Secondary markets settle the next day so often a better deal. Treasury direct does not take the money from your bank account till the day it settles and Vanguard keeps it in the settlement fund earning interest till the day it settles as well. Not sure about the other brokerage houses. Also, not sure if you rollover the t-bills how the time between redemption and the next auction works as far as any interest you are losing as that is often a week of interest as well.
FYI, if you do the math, 4 weeks for $10,000 usually gets you about $40 in interest for letting them hold your money for 5 weeks.
The Monday auctions for 3 months and six months settle on Thursday so much less time to hold your money for nothing and less redemption downtime.
The money market funds often have repurchase agreements that are taxed at the state and local level but obviously more liquid. Am looking into the ETFs now.
Good luck to everyone!
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Not having a $1 NAV on an ETF like SGOV throws me off on how taxes will be calculated later. The dividends are state income tax-free, but unsure about the capital gains from selling at a different price than the purchase price.
Before you say "liquidity", you can simply sell treasuries on the secondary market if needed before maturity.
Or create a ladder of 4 week bills over a month, and configure a bill to mature every week.
1. Select date of investment, time frame, and amount. Very intuitive.
2. Investment period can be as short as one month. Fidelity does not support one month investment.
3. Investment amount can be as small as $100. Fidelity requires $1000 minimum.
I could easily go to a thrift store with $50 and turn it into $150 flipping the stuff I buy for a tiny fraction of what the gov wants to give me pennies on the dollar.
If I'm wrong, please explain it better to me as I'm basing that $40 for $10k off a previous comment. Not saying I know much about it..(I know Jack). I just think I could be using that $10,000 to make more money in those 5 weeks than giving it to the gov for what amounts to a cheap dinner for two at outback..
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I legitimately want to learn/understand this better. Are people really handing over large sums of cash for such pitiful returns?
I could easily go to a thrift store with $50 and turn it into $150 flipping the stuff I buy for a tiny fraction of what the gov wants to give me pennies on the dollar.
If I'm wrong, please explain it better to me as I'm basing that $40 for $10k off a previous comment. Not saying I know much about it..(I know Jack). I just think I could be using that $10,000 to make more money in those 5 weeks than giving it to the gov for what amounts to a cheap dinner for two at outback..
This is for people who have cash laying around in savings that isn't doing much for them.
Obviously buying t-bills doesn't preclude you from making income in other ways, unless you need that money to generate revenue. And if you can turn $10,000 into $30,000 then that's definitely a better return than any product generating 5.5% APY interest. You'll have to weigh that against the amount of effort required to get that kind of return though.
I could easily go to a thrift store with $50 and turn it into $150 flipping the stuff I buy for a tiny fraction of what the gov wants to give me pennies on the dollar.
If I'm wrong, please explain it better to me. Not saying I know much about it.. I just think I could be using that $10,000 to make more money in those 5 weeks than giving it to the gov for what amounts to a cheap dinner for two at outback..
Brilliant investors buy dividend king/aristocrat companies at fire sale prices. That 6% annual yield today can easily fetch 16-28%/year in 20 years, plus unrealized capital gain. That's the power of compounding that no fund can match.
Also note that qualified dividends are taxed at 20% max federal. Those who make less than $42K pay no tax. Most will pay the 15% rate. There are many who live very well on qualified dividends alone and pay very little federal income tax.
People are brainwashed into buying a low cost index fund. The market goes nowhere from 2000 to 2008. Index fund yields 1.5-2%, so you have to sell some shares at a discount to maintain your lifestyle during period of underperformance.
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