Investing in bonds is considered to be safer than investing in equities because you take on the position of a creditor instead of an owner. If you want to increase the safety of your investment even further, you can invest in securities that are backed by the United States government. Two such securities are Treasury bills and bonds.
Pros of Treasury Bills
Treasury bills are offered directly from the United States Treasury. One of the major advantages of this type of securities that you can buy them directly from the Treasury without having to pay a commission to a broker. You simply get an account on the Treasury website and then you can buy T-bills. Another advantage of these is that they are backed by the credit of the United States government. They are also very liquid with maturity dates ranging from days to a year.
Cons of Treasury Bills
Although these are very safe, they do have a few disadvantages to consider. For example, the rates that they provide are not very high. Since you are not taking on much risk, you do not get much reward either. In fact, you might get a better return from a certificate of deposit at a bank. Another problem with Treasury bills is that they have such short maturity dates. This forces you to continually find places to reinvest your money once they mature.
Pros of Treasury Bonds
Another type of security that you can buy from the United States government is a Treasury bond. With a treasury bond, you get a security that has a maturity of 30 years. This can be beneficial for those who like long-term investment because you do not have to worry about putting your money into any other securities. These bonds are also backed up by U.S. government credit. You can also sell them on the secondary market if you decide that you do not want to keep them.
Cons of Treasury Bonds
One of the disadvantages of Treasury bonds is that they are not sold very frequently from the United States Treasury. The Treasury only sells them four times per year. This means that unless you want to buy them on the secondary market, you have to be available to buy them at those exact times. Another potential problem is that the interest is only credited to your account once every six months. If you buy them on the secondary market, you have to use a broker and pay a commission.