What is the point of Treasury Securities? (bond, broker, Fidelity)
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The interest rate is pretty low with 30-year T-bonds of 4% interest... on 100k investment, that's 8k per year (is that right? 2 6-month payments or is it 4k divide by 30 years) which is about 8% gain for the year... When I look at my typical investments in equities, I see returns of about 20% (if I sold them now) and they are in Roth accounts which is non-taxable... but even if in typical brokerage accounts, I can't imagine the taxes eating much of it... I suppose it is a safe investment in T-bonds... do Brokerages like Schwab, Fidelity, Edward Jones, etc sell Treasury securities? Do they mark it up?
The interest rate is pretty low with 30-year T-bonds of 4% interest... on 100k investment, that's 8k per year (is that right? 2 6-month payments) which is about 8% gain for the year... When I look at my typical investments in equities, I see returns of about 20% (if I sold them now) and they are in Roth accounts which is non-taxable... but even if in typical brokerage accounts, I can't imagine the taxes eating much of it... I suppose it is a safe investment in T-bonds... do Brokerages like Schwab, Fidelity, Edward Jones, etc sell Treasury securities? Do they mark it up?
If you can buy stocks, you can buy the 20+ year Treasury ETF (TLT) even if your broker doesn't allow you to buy bonds.
Long term treasuries returned 30% in 2011 even when people were saying yields couldn't possibly go higher. I started holding some back in 2011 (when they were already up on the year) to hedge my portfolio but I'll never chase them when they're on a tear higher.. so far they've been in the green for me.
the game plan with the 30 year treasuries has been all about capital gains the last few years as they soared in value.
even now investors buy them hoping some black swan even will send investors in other asset classes scurrying to buy them allowing those holdng them to sell out with nice profits.
if investors bid rates down even 1% you can make a 30% capital gain on a 30 year bond.
i am not saying you should buy them at this point but that is the game plan of many who do.
Thanks... that makes Treasuries a very attractive option... I think I will try to buy some... I assume the interest paid out 2 times a year is immediately taxable to the Feds for that year... correct?
Not anymore it doesn't. You're essentially buying $1 for $1.20, with a 4-cent interest payment. You might be able to sell it for $1.25, but I wouldn't call that "very attractive." You're still buying it for more than it's really worth.
Bonds are not really cut out for capital gains because they have par values and mature. The point of holding bonds is for interest. They are debt securities.
Treasuries represent the "risk-free" rate, or your "cost of capital." If you believe you can return better than your cost of capital, you don't buy Treasuries - if you don't think you can, you do. In other words, if the 10yr T is yielding 2%, and you think you can do better than 2% in the stock market, buying Treasuries is not your best option.
Never forget those same long term treasuries that were considered interest income instruments have taken top honors over every time frame going out the last 25 years. They missed beating stocks over the 15 year period but took almost every other one .
One major flight to safety can have the long bond falling to 2% and reaping a 30% capital gain so we differ there in our beliefs.
Other countries like sweeden have negative rates on bonds. They become a pure capital gains play.
What they are not at these levels are a buy and hold for income.
We actually agree. I just think at this level there is more risk than a novice may understand.
Instead of "buy low, sell high," it's more like "buy high, sell higher."
Not saying you can't make money, but faced with the choice to buy a dollar for $1.20 or 70 cents... well, let's just say I'm not scratching my head over that.
We actually agree. I just think at this level there is more risk than a novice may understand.
Instead of "buy low, sell high," it's more like "buy high, sell higher."
Not saying you can't make money, but faced with the choice to buy a dollar for $1.20 or 70 cents... well, let's just say I'm not scratching my head over that.
yep i do agree there is more risk at these levels but the way the world looks there is still a strong argument why they may once again have very nice capital gains as a flight to safety again is a very plausable thing.
lets put it this way ,the easy money is gone from bonds at this stage.
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