A treasury bill (T-bill) is a short-term debt security issued by the government of a country to finance its short-term borrowing needs. In the United States, for example, T-bills are issued by the U.S. Department of the Treasury and have a maturity of one year or less.
T-bills are considered to be a very safe investment because they are backed by the full faith and credit of the government. They are also highly liquid, which means that they can be easily bought or sold on the secondary market before they reach maturity.
As a real estate investor that is looking for real estate deals all of the time. I need to be able to get to my money if I need to. With a T-bill, because it is highly liquid, it is much easier to do.
Investors can buy T-bills directly from the government through a competitive or non-competitive bidding process. The difference between the price paid for the T-bill and its face value at maturity represents the investor’s return, which is often expressed as a percentage yield. T-bills are typically used as a low-risk investment and as a benchmark for short-term interest rates.
If you look at the chart below. You can buy T-bills and hold them for different periods of time based on how long you want to keep your money tied up.
There hasn’t been any incentives for people to save their money for a long time, because interest rates were so low. Meaning the cost of capital (borrowing money)was so low. So people could borrow money to buy assets and get a better return on those assets than they could anywhere else.
Now that interest rates have risen, it means that the cost of capital has risen and the government pays you a higher return on your money when you allow them to borrow it.
It isn’t really more complicated than that.
Let’s say you have $100,000 dollars to invest. And you decide to put it in a T-bill.
To calculate the amount you will get from investing $100,000 in a T-bill with a 4.8% yield for 52 weeks, we can use the following formula:
Maturity Value = Principal * (1 + Yield/100 * Time/365)
where:
- Principal is the amount you invest, which is $100,000 in this case
- Yield is the annual yield, which is 4.8%
- Time is the duration of the investment in days, which is 52 weeks * 7 days/week = 364 days
Plugging in these values, we get:
Maturity Value = $100,000 * (1 + 4.8%/100 * 364/365) Maturity Value = $104,753.42
Therefore, if you invest $100,000 in a T-bill with a 4.8% yield for 52 weeks, you will receive a maturity value of approximately $104,753.42 one year from now. This calculation assumes that you hold the T-bill until maturity and that there are no fees or taxes associated with the investment.
A year ago, you would have received
Using the same formula as in the previous answer, the maturity value of a T-bill investment of $100,000 with a 1.75% yield for 52 weeks can be calculated as follows:
Maturity Value = Principal * (1 + Yield/100 * Time/365) Maturity Value = $100,000 * (1 + 1.75%/100 * 364/365) Maturity Value = $101,753.42
Therefore, if you invest $100,000 in a T-bill with a 1.75% yield for 52 weeks, you will receive a maturity value of approximately $101,753.42 one year from now. Again, this calculation assumes that you hold the T-bill until maturity and that there are no fees or taxes associated with the investment.
$101,753.42 versus $104,753.42 is a big difference. $3,000 dollars is a nice gain, especially in one of the least risky investments.
The average interest rate provided by a checking or savings account at a bank can vary significantly depending on the bank, the type of account, and prevailing market conditions.
As of my knowledge, the average interest rate for a savings account in the United States was around 0.05%, according to Bankrate.com. However, some banks offered higher interest rates, often in the range of 0.5% to 1%, while others offered lower rates, including some accounts that did not pay any interest at all.
The interest rates for checking accounts are generally lower than those for savings accounts. Some checking accounts may not pay any interest at all, while others may offer a small amount of interest, often less than 0.1%.
I don’t have a lot of money in the stock market, minus my employer funded 401K. And it is not something I pay close attention to. However from what I hear, many people are down since 2021 by anywhere from 15-25% with their market investments.
Look, we all know that I am a real estate person. And with real estate you are looking to get anywhere between 10-15% return a year. There are a lot of variables here to be calculated. However, if you are risk averse, putting your money in to a T-bill can provide you a solid return.
To your success and your future.
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I am not sure what kind of legal disclaimer is necessary, but I would encourage you to do your due diligence and invest your money into things that you understand and feel comfortable with investing in.
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