This article will show you how to buy bonds directly from the US government. Interest rates are climbing. That means bonds may start to make more sense for your portfolio.
A lot of folks put their money into the highest yielding savings account without thinking of buying US Treasuries. Some people don’t even know that you can buy US Treasuries directly from the government with no middle man taking a cut. You should consider US Treasuries since they offer a competitive rate when compared to savings accounts. Treasuries fit perfectly into the risk-free portion of the Triad Portfolio.
The Treasury Department uses a website called TreasuryDirect which you can access by going to www.treasurydirect.gov. A screenshot of their website is shown below.
Before you set up an account through TreasuryDirect, there are a few things you need to know.
Creating a TreasuryDirect Account
Click on “Open an Account” under the login button on the main page. You’ll get to this screen where you’ll click on the first link labeled TreasuryDirect.
Then you’ll get to this screen where you can choose to open an account as an individual or business.
Once you hit the “Submit” button at the bottom, you’ll be taken to a page where you’ll have to put in all of your information.
You’ll be asked to input a checking or savings account so that you can get paid! Then on to the next screen where you’ll be asked to input some security questions.
After you put in a password and answer 3 questions, TreasuryDirect will send you an email to verify your account.
You’ll also get your account number in this email which you’ll need to copy and paste into the TreasuryDirect login page. Then you’ll get a one time password (OTP) the first time you log in from your computer. Then you’ll input the password you created on the next page using an onscreen keyboard (not your computer keyboard). This system is extremely secure! And finally, you’re in your account and can buy marketable securities .
Now you can click on “BuyDirect” and peruse the offerings.
You can buy:
1) Bills – Mature in a year or less
2) Notes – Mature in 2, 3, 5, or 10 years
3) Bonds – Mature in more than 10 years
4) TIPS – Treasury Inflation Protected Securities – interest is pegged to the CPI
5) Series I – Return is based on hybrid fixed and variable rate interest. Variable interest is based on CPI
6) Series EE – Return is a fixed rate. See this page for current rate.
Series EE and I savings bonds are basically worthless. You’ll have a hard time keeping up with inflation with them. Don’t buy them.
Invest in Bills, Notes, Bonds, or TIPS
I’d recommend starting out investing in T-bills at a short duration just to see how it works. So buy a $50 4-week T-Bill and make sure that everything exits and re-enters your checking account correctly. Then, when you’re comfortable, invest in longer maturity bonds to get a higher rate of return. But don’t go too far out into the future. I recommend staying at the 5-year mark or less. The 2-year and 3 -year bonds are a sweet spot where you’ll get a good amount of interest without having your money locked up forever.