Treasury Bond

Treasury bonds (T-bonds) are long-term investments issued by the U.S. Department of the Treasury, typically maturing in 10 to 30 years. They are purchased at face value and pay a fixed interest rate, known as the coupon rate, every six months until maturity. For instance, if you buy a $1,000 T-bond with a 3% coupon rate, you will receive $30 annually, divided into two payments of $15 every six months, until the bond matures. At maturity, you will also receive your initial investment back, making T-bonds a reliable source of income.

A common misconception is that T-bonds are only suitable for wealthy investors. In reality, they can be purchased in increments as low as $100, making them accessible to a wide range of investors. Additionally, some people mistakenly believe that T-bonds yield low returns compared to stocks. While it's true that T-bonds generally offer lower returns than equities, they also carry significantly less risk and can serve as a stabilizing component in an investment portfolio.

When considering T-bonds, it's essential to factor in inflation, as the fixed interest payments may lose purchasing power over time. An actionable takeaway is to use T-bonds as part of a diversified investment strategy. They can provide a steady income stream and reduce overall portfolio risk, especially during market volatility. Don’t ignore the potential benefits of including T-bonds in your long-term financial plans, especially if you prioritize capital preservation and predictable income.