I just dont understand that the bg deal is for an indvidual investor for tbills or tbonds since they pay so low relative to other safe investments?
1. You pay state (and federal) income tax on CD’s and money markets. You do not pay state income tax on Treasuries (although you do pay federal income tax).
2. Money markets can lower how much they are paying at any time. Treasuries and CD’s are guaranteed a specific rate until maturity.
3. CD’s rollover automatically, so you can get locked into a renewal that you do not want if you are not careful.
4. If a bank goes under, you lose whatever you have in CD’s and money market accounts over the FDIC insurance limit. In theory, treasuries will not default unless the federal government goes bankrupt.
US Treasury securities are the safest available. also, Interest on US bonds is not subject to state income taxes which compensates for a lower interest rate.
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Aside from being safe, treasuries offer the opportunity for capital gains, like stocks, which you don’t get in CDs. As interest rates fall, the value of a bond or bill increases. Likewise, if decreases as interest rates rise, but if you hold it to maturity, you are guaranteed to get what you invested back.
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1. You pay state (and federal) income tax on CD’s and money markets. You do not pay state income tax on Treasuries (although you do pay federal income tax).
2. Money markets can lower how much they are paying at any time. Treasuries and CD’s are guaranteed a specific rate until maturity.
3. CD’s rollover automatically, so you can get locked into a renewal that you do not want if you are not careful.
4. If a bank goes under, you lose whatever you have in CD’s and money market accounts over the FDIC insurance limit. In theory, treasuries will not default unless the federal government goes bankrupt.
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Not everybody is as smart as you.
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CD’s are backed by banks ( the same people who have 23 years olds giving $ 300,000.00 loans to people whose net assets are a pick-up truck…and no money down, besides)…Treasuries are backed by the most successful government in the world.
Now, let me see…who should I trust?
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