Specific Government Bonds -- Diving in the deep to become THE Rich Grandma

Have you ever seen the propaganda from the government, BEGGING the people to buy war bonds. Here’s a quick example for those who haven’t. 

Patriotic for sure...

Government bonds have evolved so much from that so let’s talk about it and get those biceps built and rich grandma money flowing!

For those who didn’t read my last post 😒 a government bond is simply you lending money to the government and the government paying you back your amount + interest. They are typically anywhere from 10-30 year long periods to being paid back, so they aren’t seen as the most short-term investment, but can definitely be part of your portfolio. 

There are SO many different types of government bonds, let’s look at just a couple 🙃

Municipal Bonds:

• Issued by local governments to fund local projects like libraries or parks

• Typically have lower interest rates compared to stocks 

• Tax-free at more federal levels and some state and local levels

U.S. Savings Bonds:

• Issued by U.S. Treasury 

• These bonds sell at a fixed price and have a fixed rate of interest

• Tax-free at most federal income levels

T-Bills:

• Short term (4-52 weeks)

• Bills are sold at a discount or face value

• When time is up, investors are paid its face value

T-Bonds:

• Long term (20-30 years)

• Give coupons (regular interest payments) semi-annually

• Minimum investment of $100 needed

Treasury inflation-protected securities (TIPS):

• The bond amount increases for inflation and decreases for deflation 

• Bond can be anywhere from (5 to 30 years)

• Have a fixed interest rate determined at the auction 

Choosing the single or multiple types is dependent on YOUR situation and patience. If you are unable to put down money that you may not get fully back until 30 years, a T-bill or Municipal short-term bond may be better. Or vice-versa, if you have a lot of short-term investments and want a relatively risk-free change, US savings bonds or TIPS may be the way to go. 

Hopefully you have chosen bonds that make sense for you. But how do you buy them??? Unfortunately, it's a little more complicated than you might think. 

Why does it have to be complicated 😭😭

The U.S Treasury sells these bonds at auctions throughout the year. Only certain participants can participate and buy bonds directly at these auctions, mainly large bonds. HOWEVER, many bonds are traded in the secondary market. Individual investors can buy or sell their previous bonds. Treasuries are also available to purchase through the U.S treasury or brokers.

Two online great choices are:

• Schwab: variety of bond choices

• Treasurydirect: mainly U.S Saving Bonds

These are not the only options and I encourage you to research if either of these companies do not have the bonds you are looking for. Stay tuned for next time where we talk about —-- corporate bonds!!!! (government bonds but on the next-level)

Sources:

https://www.investopedia.com/terms/g/government-bond.asp