An Easy Guide to T-Bill ETFs

Can your cash be working harder?

Money still sitting idly in the bank, or worse, under your mattress? Are you ready for your cash to start pulling its weight when it comes to reaching your savings goals? If so, T-Bills may provide the solution you’re looking for – offering higher yields than cash1 (now over 5%2), easy access to your funds, and protection against inflation. The best part? Investing in T-Bills can be as simple as buying an ETF comprised of them!

Interested? Keep reading.

Key Terms You Need to Know

A T-Bill, short for Treasury Bill, represents your interest in a short-term loan to the U.S. government.

Think of these securities as a promise from the government to repay you your investment, plus a bit of interest, after a set amount of time. Because it’s backed “in full faith and credit” by the U.S. government, it’s considered a low-risk investment.

Now, a T-Bill ETF (Exchange-Traded Fund) is a type of investment fund that invests in a bunch of T-Bills giving you an opportunity to own a portion of a large group of these investments. You can also buy and sell your shares of the ETF anytime you want.

Here’s a closer look at why they’re worth considering…

Top Reasons to Consider T-Bill ETFs

1. More Earnings: T-Bills are offering income over 5%2, which is more than you get from many savings accounts, CDs, and even other bonds.

2. Regular Distributions: By investing in a T-Bill ETF, you get regular distributions that can be reinvested to make your money grow even faster (compounding). Many ETFs will make monthly dividend payments which can be more frequent that those of the underlying security.

3. Tax Benefits: The income you earn from T-Bill ETFs is free from state and local taxes, meaning you keep more of what you make.

4. Easy Access to Your Money: You can buy or sell T-Bill ETFs anytime without penalties.

5. Protection Against Rising Prices: T-Bill ETFs offer some protection against inflation, meaning your money can hold onto its buying power even when prices go up.

6. Less Risk from Interest Rate Changes: Generally, when interest rates go up, the value of your bonds goes down. Because T-Bills are “short-term” (mature in a year or less), they are less affected by changes in interest rates than longer term bonds.

7. Safer and Regulated: T-Bills are backed by the U.S. government, offering a safer way to invest your money.

T-Bill ETFs vs Other Ways to Save

How do T-Bill ETFs measure up to traditional ways of saving money?

T-Bill ETFs vs. Stashing Cash: T-Bill ETFs are safe, regulated, and grow your money over time, unlike cash stored at home which can be lost or stolen and doesn’t grow.

T-Bill ETFs vs. Savings Accounts: T-Bill ETFs typically offer higher returns and can make your money grow faster due to regular distributions.

T-Bill ETFs vs. CDs (Certificates of Deposit): T-Bill ETFs let you access your money anytime and don’t penalize you for early withdrawals, unlike CDs.

T-Bill ETFs vs. I-Bonds: T-Bill ETFs can be bought and sold easily and are available in any amount, unlike I-Bonds.

T-Bill ETFs vs. Other Bonds: T-Bill ETFs are safer and offer more predictable returns than most other bonds.

Remember, choosing the right way to save and grow your money depends on your personal situation and goals.

1. US Savings Account Rate: 40% as of June 30, 2023 (Y-Charts). US Savings Account Rate is at 0.40%, compared to 0.39% last month and 0.07% last year. This is higher than the long-term average of 0.16%.
2. Bloomberg U.S. Treasury Bill 1-3 Months TR Index Value Unhedged: Yield 5.38% as of 07/21/23. There are no assurances that this yield will be sustainable in the future. Investing in T-bills and T-bill ETFs is different than a Bank Savings account. There is no FDIC Insurance, no Bank Guarantee, and the investment May Lose Value.

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