Investment Returns Are Virtually Guaranteed With U.S. Treasury Bonds

June 7, 2019

I am always loath to do anything risky with my money. Like, investing, which is easy to do if one is experienced in it and has money to burn. For one thing, I just don’t make enough money yet to cushion any investment loss. I don’t trust hot investing tips from investors or websites that are paid to peddle such tips.

Currently, I just have too many financial and familial responsibilities to deal with to take too many chances with investing. The kryptonite-like weakness of all financial markets is uncertainty. Yet, volatility and uncertainty are the financial news alerts of the day every day now. Investing for the uninitiated can be unto a financial minefield.

One company after another is disappointing in their IPO debuts. Remember the cryptocurrency boom? Me neither. Various financial market indices have undergone multiple corrections since last year. Investment is a long-term gambit. You should invest with a decade-long mindset for appreciable interest returns. Even then, most investment returns are in the range of 7% to 10%, realistically.

Still, such rates of returns are only contingent upon making the right investment decisions in the first place. In all of my research, I am learning that there is one investment option, especially for investing newcomers, that offers essentially guaranteed returns: U.S. Treasury Bonds.

What Are U.S. Treasury Bonds?

United States Treasury Bonds are fixed-interest, federal debt securities that can have maturity dates spanning a decade, 20-years, or 30-years. What does that mean, in laypeople terms? A Treasury bond is basically a loan issued by private citizens to the United States government. When you buy a U.S. Treasury bond, you are loaning the United States government money to finance its federal activities.

Investing in U.S. Treasury Bonds is generally viewed as one of the safest investments that you can make. Your investment is backed by the solvency of the United States government, so it will never lose value. Treasury Bonds pays out interest, or coupon rates, every six months. A 10-year bond accrues 2.07% interest, a 20-year bond has a 2.37% interest rate, and a 30-year bond has a 2.53% interest rate.

However, U.S. Treasury bonds shouldn’t be cashed out before their maturity dates. “Maturity,” is a term to describe exactly when the bond no longer earns interest. A U.S. Treasury bond may be a great investment tool to add supplemental income to a retirement plan. Still, what’s the point of buying a 30-year Treasury bond just to cash them out after three years of ownership?

How Do You Buy U.S. Treasury Bonds?

U.S. Treasury bonds are sold via auction in noncompetitive and competitive bidding. You can buy Treasury bonds directly from Treasurydirect.gov through a bank or broker. This is the noncompetitive way to buy them. Original issue Treasury bonds are sold every February, May, August, and November. Reopening auctions for additional issue bonds are sold all other months.

Or, you can buy U.S. Treasury bonds through the secondary markets maintained through brokers and certain financial institutions. Secondary markets are just bond owners selling amongst themselves. Whatever method you choose, U.S. Treasury bonds are the safest investment bet you can make. The interest rates are modest but are virtually guaranteed relative to well-researched stock picks.