Treasury Bills - The Disadvantages (Know Before You Buy)

I buy T-Bill thru my brokerage and I know exactly what my cost is before committing. I can also sell the T-Bill at any point before maturity. I actually like that I can use them as an instrument to defer my tax liability to the following year.

I buy short term t-bills…ladder them for a bit ….then repeat if beneficial…never thought about I bonds….

I 100% agree with you that not knowing the actual interest rate until the issue date is a major disadvantage. It seems a lot of people in the comments don't agree. Weird! Question: Is this the same disadvantage for longer term securities like Notes, and Bonds?

This video made everything very clear. I thought i was being duped when I did the math on my interest payment and the Interest/yield that was showing on my T-Bill and it was much lower than it was stated. This means if you leave your money to be reinvested every month, then you will receive the lowest rate always.

You don't have to wait. You always "bid" whole amount. You bid 10K and if you buy for 98.85, 1.15 will be your "interest" and you will have it sitting on your account day one. You'll get whole 10K back at maturity date. Makes sense?

If your intention is to educate, good job. As an investor in T-Bills, if we didn't know the aspects of investing in them, we should know. Anyone who doesn't know is a moron who is a poor investor, IMO

Can I buy a $100k worth t-bills?

Interest only paid at maturity is a BIG advantage, not disadvantage, allowing you to push all that income off to next year. Deferred income is usually a good thing.

Thanks dad

just get a brokerage account with Schwab and buy and sell TBills as if you were buying stocks. They show to you what the effective annualized return is if you keep the Tbill until the redemption date. No need to use spreadsheets nor any crazy math. They show all the different lost available with different expiration dates around the window number of months you choose. You seem to be totally unaware of this. there is no such a locking up period. trade on the huge market for Tbills any time you need.
The bond value increases as the expiration date gets closer at a rate equal to the bond rate as long as intesrest rates do not change. if interest rates go down then your tbill earns a bonus.

Treasury Bills have a GREAT advantage over CD's. I can purchase a T Bill that matures in just a few days to a few weeks or longer that pay MORE than CD's. They can be quite liquid in nature compared to CD's which are 3mo-12mo or longer. You're making this far more complicated than necessary. I'm quite the newbie and I understand it. In fact when my CD's expire those funds are going into T Bills and WILL continue to do so if they provide a higher rate than CD's. Just takes some simple understanding.

Wow! Thank you for your VERY informative clip!!!

Knowing what the previous T-bill rate was is a good indicator of what the new rate will be. If you pay attention to what is said at the FOMC, that gives you an indicator as to which way the rates will go. Also, the ADP unemployment change will tell you, including Nonfarm payroll and the ISM manufacturing index. None of this is an exact science, but you get a much better picture of which direction rates will most likely go. Getting the interest at the end isn't an issue either. You should know the rules before you buy. Personally, I think you're just trying to come up with negative things to say about T-bills. If you don't like them, don't buy them.

The major disadvantage I have encountered is that my money isn’t making any money from the time one bill matures to the time the next bill is issued. TD Ameritrade doesn’t allow you to specify “Automatic Reinvestment” on treasuries (unless you call the fixed income desk and pay a commission), but for brokers who do, maybe this problem goes away, but I doubt it, because it seems like the broker would still need to order your next T-bill and wait for the auction and issue dates before the T-bill is issued. The result is that the returns are watered down, and significantly for very short term T-bills.

T bills are the best right now. The video here doesn’t give the real advantages the t bill has. Looks like the video trying to promote other funds to invest rather than treasuries right now for advertising purposes of this publisher. I don’t recommend any short term investments but only treasuries. Not a good advice from this video.

Great Job! I really appreciate how clearly you delivered the information.

5. "In Treasury Direct, when you buy a Treasury marketable security, you must hold it in your TreasuryDirect account for 45 days before selling or transferring it."

Why would I buy a 30y Bond at 3,625% interest if I can get a 3months T-Bill at 4,75% ? Can someone explain please ? It makes absolutely no sens to me.

Thanks very helpful.

I bonds are now less than 7% and you can only buy $10K. First you can easily follow the history of the t-bill auctions and you will get a % near the last few auctions sometimes only a hundredeth of a % more or less. 4 week treasury bills are selling at 4.1% and you cannot get that at a bank without buying a 9-12 month CD so not a disadvantage at all. The rest are BS disadvantages. Of course a broker is going to take a commission, have to be stupid to think they would not.

This clown would probably be better off buying Bitcoin.

What are the chances of lossing money? I thought these were low risk!

If i had a 4 week tbill can i reinvest after the 28 days or am i stuck until 45 days passes?

Good video explaining disadvantage of T-bills. Question : Where did you get that tentative auction schedule of U.S treasury securities table ? TIA

With ding dong giving billions to Zelenski while our so called country is 32 trillion in debt, I don’t see how T Bills can remain safe.

if a buy a 4 week $100 bond. Am i wrong to conclude that my interest made would be .33?

Lets say I bought a 1 month bill at 4%. When you said annualized rate it means I get paid 4% at the end of the month or 4 divided by 12%?

Disadvantage #2- Interest paid at maturity date. A couple of days ago I looked up my 1099-int on my Treasury direct account. The 1099-int for 2022 included the interest I have yet to receive on T-bills I purchased in 2022 that mature in 2023!

If the 2nd-market T-bill is bought from a brokerage account, can the price be seen before the purchase? Will the gain be similar to that bought from the treasury website?

Hello! I have a doubt. I am going to buy some bonds trough Interactive Brokers. I am US non-resident. Is there any US Withholding Tax when maturity? I mean I know notes and bonds, as they are paying every 6 months or so, or even dividends you have a US Withholding Tax of 30% or 15% depending if your country have a treaty with the US. But this T-Bills seems like you buy a stock and sell later, and I know in this case there's no US Withholding Tax.

Thank you in advance

Wait, so are you saying that when the treasury direct pulls from my checking account, they will charge me a fee? And I won't know how much I'm paying even though it asked me how much i would like to invest? What is that about?

These rates can't keep up with inflation...Like you're locking your money up and ensuring loss of purchasing power. What happens to your treasury when the next crash and bail in happens?

Anybody can tell me if there is a limit on how many t-bills a person can buy?

STOP SAYING "SO"!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Question if I buy a Tbill on treasury direct for 13 weeks when the money matures do I have to do something to redeem my security or it will be deposited back automatically in my bank account? Thanks.

If my comment below is valid it almost seems like the worst disadvantage is annualized rates

I'm a bit confused, if these are all annualized rates what the point of doing anything under a 26 or 52 week bill. The returns on shorter durations most likely wouldn't even be as good as keep your $ in a HYS account that's garnering 2-3% interest. Am I missing something here? It almost seems pointless to buy a short duration T bill.

If liquidity is a issue you should not invest in anything that involves the word maturity.

😬 Liquidity is paramount.

The issue might be on the title of the video. It is very informative and easy to understand but if you know the basics of treasury bill investment, you would think these are not disadvantages but aspects to consider before buying. But, perhaps I'm wrong. Thanks for the video!

Oh! One more thing: If you purchase through Treasury Direct, upon maturity your money is deposited directly into your bank account; you don't have to do a thing!

I'm sorry, but I completely disagree with everything you said in the video, On number 4, liquidity: DON'T INVEST IF YOU CAN'T HOLD 'TILL MATURITY! Number 3: Treasury Direct allows you you to choose your action date. Number 2: interest payment----YOU GET YOUR INTEREST, RIGHT? Number 1: How much you will pay? Well, the Treasury publishes daily interest rates on all treasury instruments, so you get a pretty good idea what you will pay. Your investment in Treasurys is 100% safe, and lastly, you make more interest than you can in a bank savings account. If I don't know how much I will pay, I will certainly not pass up a 4% interest rate. What's the point of the video? Just to look for faults in this type of investment?

Appreciate the video, I don’t see any of these being a drawback if you know what you’re getting into up front

why are there 2 different rates, in the rates columns in your display page in the beginning of your video? how do your know which rate column to use? seems to me i'm seeing double with glasses.

You can buy treasuries in the open market.

why is it imporant to know the aucion date and the bids ?

what do you mean " it's an anualized rate". say If I but a 4 week treasury for $1000 at 2.4% does that mean in 4 weeks I'll get 1024?

I don't consider these disadvantages, but more of disclosures.
I started buying Treasury Bills in April 2022. I started with 2 and 3 month, just a couple in my IRA. Now, in October, I have mostly 6 month, but a 3 month and a 1 year one too. I build a spreadsheet that was attached to my investing sheet that shows the aspects that you described. Start date, end date, length of time, my cost and par value. It is all neatly added up and transferred to my main sheet. I'm not a spreadsheet guru by any means, but I get around. :)
You did make a nice presentation.

Great work you present the information in a clear and concise manner. 👍

If you’re going to invest for 4 weeks you’re better off opening a lemonade stand.