Investing in US Treasuries offers several notable advantages:
1. Low Credit Risk: US Treasuries are issued by the US government and are considered among the safest investments due to the government's high repayment capacity. The US government has never defaulted on its debt, making these bonds virtually risk-free.
2. High Liquidity: The US Treasury market is one of the largest and most liquid bond markets globally, allowing investors to buy and sell Treasuries with ease and minimal transaction costs.
3. High Market Transparency: The US Treasury market is highly transparent. Investors can easily access comprehensive information on Treasury prices, interest rates, and maturity dates via the Tiger Trade app.
For investors seeking an easier entry into Treasury investments, US Treasury Exchange-Traded Funds (ETFs) are an excellent option, particularly for beginners.
US Treasury ETFs are open-end funds that invest in a diversified portfolio of Treasury bonds. Unlike mutual funds, these ETFs trade on stock exchanges, offering several advantages:
1. Diversified Investment: US Treasury ETFs typically include a mix of bonds with varying types and maturities, ranging from short-term Treasury bills to long-term inflation-protected securities. This diversification helps spread risk and reduces the impact of any single bond's default risk.
2. Convenient Trading: ETFs can be bought and sold with the same ease as individual stocks. On the Tiger Trade app, you can quickly find and trade suitable US Treasury ETFs.
3. Lower Entry Barrier: Purchasing individual bonds often requires a substantial minimum investment (e.g., $1,000 per bond). In contrast, investing in US Treasury ETFs can be done with a smaller amount of capital, and you can select the number of shares based on your financial situation.
After selecting the appropriate US Treasury product, consider the following straightforward investment strategies:
The "buy and hold" strategy is a traditional investment approach where you purchase bonds and hold them until maturity. This strategy focuses on:
1. Fixed Interest Income: Bonds provide regular, predictable interest payments, making this strategy ideal for investors seeking stable income, such as retirees.
2. Principal Recovery: At maturity, the bond issuer redeems the bond at face value and returns the original principal to the investor. Holding the bond to maturity ensures recovery of the invested principal, barring any default.
3. Lower Risk Tolerance: Bonds generally offer lower risk compared to other asset classes, with a high degree of predictability regarding principal repayment.
4. Simplified Investing: This strategy requires minimal management. After purchasing the bond, you collect interest payments and wait for maturity.
In summary, the buy-and-hold strategy is suitable for investors with long-term goals who seek stable income and are willing to accept some degree of price volatility.
The "laddering portfolio strategy" enhances the buy-and-hold approach by diversifying bond maturities, thus optimizing investment performance.
A laddered portfolio involves purchasing bonds with staggered maturity dates, creating a "ladder" of bonds. This method helps manage interest rate and reinvestment risks by ensuring that bonds mature at various intervals, allowing reinvestment based on current market conditions.
For instance, you might invest in one-year, five-year, ten-year, and fifteen-year bonds simultaneously. This arrangement ensures liquidity for upcoming expenses while capturing income from different maturity points.
The laddering strategy is particularly beneficial for investors with specific financial goals, such as funding a child’s education in five years, purchasing a home in ten years, or planning for retirement in fifteen years.
While laddering balances short-term liquidity needs with long-term returns, it does not eliminate interest rate risk.
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