Bonds or Savings Bonds are a type of investment that can be purchased from the U.S. National Treasury and later exchanged for their cash value. While there are other types of bonds, U.S. bonds are the most secure because they are backed by the government. Bonds are quite literally the inverse of Stocks, because when one is up, the other is down. In fact, Bonds are a great way to balance your assets while investing in Stocks.
Investing in US Treasury Bonds: Treasury Bonds are the most common type of Bond issued by the National Treasury. These bonds have a 10 year maturity, and can be purchased in ranges from $1,000 to 1 million dollars. Treasury bonds pay out every 6 months, and are fully backed by the U.S. Government, even if you purchase them from a third party source. Buy U.S. Savings Bonds
Investing in US Treasury Notes: Treasury Notes are similar to Treasury Bonds except that they can be purchased to mature in 2, 5 or 10 years respectively. Notes can also only be purchased in units of $1,000. These notes are periodically sold at government auctions where you can place a competitive or a non-competitive bid. The value of these notes does not change, however; they are subject to inflation. A non-competitive bid ensures that you will get the note; a competitive bid means that someone can still outbid you. (bids are for interest rates and not for the actual note).
TIPS (Treasury Inflation Protection Securities) : Commonly known as TIPS, Treasury Inflation Protection Securities are sold at auction in increments of $1,000 in a similar way to Treasury Notes. These securities mature every 5, 10, and 20 years, meaning that they are a more long term investment than most Treasury Notes. The difference between Securities and Notes is that the interest rate on Securities is adjusted every 6 months according to inflation. When inflation is up, you get more money, and when it is down, you get less. What this means is that each payment from your Security could be higher than the next if inflation is on the rise. However, during a period of deflation, you could actually receive less than face-value for your bond.
Investing in US Treasury Bills: Treasury Bills are a type of speed-bond, more associated with cash management than investment. Treasury Bills have a maturity period of 4-26 weeks, making them a very short term investment. These bills can be purchased in the same way as other Treasury Bonds. There are many types of U.S. Bonds and Bond Funds, and it’s up to you to choose which is best for you. Try checking out market values, possible profits and etc. before making a purchase. You can also remember that you can purchase bonds from sources other than the U.S. Government, however; the security and validity of your bond will not always be guaranteed. However; anything with a genuine U.S. Treasury stamp on it is guaranteed and backed by the U.S. Treasury.
If you’re thinking about investing, US bonds and bond funds are a great way to go. Just make sure that you invest wisely and can afford the money spent.
Looking for other U.S. Industry Resources?