Investing in either stocks or bonds over the past six months has undoubtedly been a roller coaster. It’s literally been nothing but up-down-up-down-up and now back to down again with no real progress made, notes David Dierking, founder of ETFFocus.com.
Things looked good in January when growth stocks rebounded, but turned south when a series of higher than expected inflation readings forced the Treasury yield to again readjust higher and send stocks lower. It’s a familiar theme that’s been playing out for nearly 15 months and may not be done for several more.
This is perhaps the best environment in decades for taking the yield offered by cash and walking away. A lot of investors are already taking advantage of it. Perhaps you should consider it too.
I don’t know what’s going to happen in the market any more than anybody else. But given the Fed & interest rates, a potential recession and a lot of geopolitical uncertainty, taking a 5% return and sleeping like a baby seems like something that should at least be considered.
The most straightforward way would be to go to the Treasury Direct website and buy a T-bill directly. Of course, that requires a bit of active management. You’d need to buy the T-bill and then roll it into a new one when the original matures. Or you could buy an ETF and have the work done for you.
I’ve picked out four Treasury bill ETFs that fit the bill (sorry for pun). All offer exposure with very little cost, but it’s worth knowing the little differences between all of them.
iShares 0-3 Month Treasury Bond ETF (SGOV) targets the shortest of short-term T-bills. SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) is one of the biggest T-bill ETFs out there with more than $24 billion in assets. It targets nearly the same maturities as SGOV, although it’s slightly more expensive. That translates into a slightly lower yield.
U.S. Treasury 3 Month Bill ETF (TBIL) is unique in that it will hold only the most recently issued 3-month Treasury bill. Since these auctions are held every week, TBIL will liquidate its original T-bill holding and buy the new one. It’s probably the best way to hold a pure 3-month T-bill without buying it from the Treasury yourself.
If you want to extend your duration risk just a little bit, you can go with iShares Short Treasury Bond ETF (SHV) instead of SGOV. SHV holds T-bills with maturities up to one full year. It gives you slightly more yield, but also increases the potential for share price fluctuation a bit as well.