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Treasuries Cheaper

By Daphne | March 25, 2008

There is a new investment option for people who want to have some cash product holdings. The Treasury Department says that the investment threshold for Treasuries will be lowered from $1000 to $100.

“The new, lower minimum Treasury amount will put marketable securities within reach of more savers and investors in the United States and around the world,” said Anthony Ryan, Assistant Secretary of the Treasury for Financial Markets.

This makes treasuries much more appealing to investors especially those who do not have $100 to set aside. It is easier to get $100 and try a new product.

Beginning April 7, people will be able to buy as little as $100 in Treasury marketable bills, notes, bonds and Treasury Inflation-Protected Securities (TIPS). Investors will also be able to purchase these securities in increments of $100.

The problem is that unlike savings bonds and CDs many people do not know what these products are even if they had more money to invest in them and could meet the thousand dollar threshold.

This information is appealing to those who wanted to diversify their portfolio and desire a better return than a savings bond. Like savings bonds,  interest is paid semiannually. The interest is based on inflation and the Consumer Price Index. With TIPS you do not have the same security as you do with a face value I Bond. I Bonds are inflation adjusted. Interest is also due on the amount invested and the amount of interest earned. With I Bonds you only pay tax on the interest. Depending on your tax situation, you may have to pay more tax when the Treasury is called. After a certain period of time, you can redeem an I Bond without paying a penalty and can purchase them at lower investment thresholds than $100. Currently you can purchase I bonds for $50 and $75 if you want a paper bond, if you want an online account you can purchase bonds for as little $25.

TIPS seem to be a good way of diversifying your portfolio but with the amount of risk involved before the Treasury Department lowered the purchase price to $100 other times seemed to be better deals. Now with $100 being the purchase price, taking the plunge won’t be as risky

For more information on TIPS, see TreasuryDirect.gov.

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Topics: March 2008 |

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