One type of money market security that investors can utilize are treasury bills. These are essentially government-issued investments, and are often called “T-bills.” Treasury bills allow the United States government to utilize money invested by citizens of the country.
Treasury bills are investments that mature no longer than one year, making them a safe, conservative short-term investment. Similar to certificates of deposits (which we will discuss further later on in this article), they are issued in increments of ninety days, six months, and twelve month maturities. Treasury bills have a specific face value. They are purchased at less than their face value, but are paid as such once they have matured. The investment that you gain from treasury bills is the difference that you earn between the purchase price and the maturity value.
As easy as the maturity process is for a treasury bill, they are a little more complicated to obtain. Unlike other investment opportunities such as bonds and CDs, you cannot just walk into your local financial institution and obtain them. Treasury bills require a bidding process in which numerous investors will be competitively bidding on a particular value of treasury bills. There are other ways that are non-competitive, but the general idea is that you are bidding on the return that you want to receive on the purchase price of the treasury bill. You may not get what you bid for, so keep this in mind when considering treasury bills as a way to invest your funds.
Treasury bills are loved for their simplicity and their accessibility. They are sold in lower denominations, so even if you have only a thousand or five thousand dollars to invest, you can enjoy the short-term, conservative benefits of purchasing a treasury bill. Treasury bills are extremely low risk due to the fact that they are fully backed by the government, and they are exempt from taxes–both state and local.
As simple as they are, the pitfall of a treasury bill is the fact that they will not make you “rich quick.” They are low-risk and conservative investment opportunities, and other money market securities will offer you a higher rate of return, as well as a long-term investment if that is what you are looking for. Additionally, as with other investments, if you cash them out before they mature, you may take a hit on your initial investment.