How To Build A T-Bill Ladder 2024 (And Why You Should!)
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- Опубліковано 22 тра 2024
- A T-Bill ladder strategy is the best way to invest in Treasury Bills. By building a bond ladder with your T Bills you give your self several advantages as an investor and avoid many of the downsides to Treasury Bills.
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0:00 Intro
0:36 What Is A T-Bill Ladder?
1:27 Why Build a T Bill Ladder?
2:51 T-Bills vs CDs vs I Bonds
3:57 Why I'm Building a T-Bill Ladder
4:57 My T-Bill Ladder
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#TBills #treasuryBills #bondladder
Watch Next - Updated T-Bill + I-Bond Strategy ua-cam.com/video/Vb92gX0Nccw/v-deo.html
Jagx
Great info and just what I needed. Thank you
love these newbie friendly vids
Definitely trying this out
Love the video! Learned a lot!
Thank you for this video
I really like this methodology.
My ladder has one rung. Gotta love that inversion.
I'm building a t-bill and i-bond ladder for now
Just bought my 1st step.
As normal people's bills come due monthly, I was hoping you would talk about creating an income stream using the ladder via combined T-Bill, T-Notes, and T-Bond strategy. To do this I'm always looking at when interest is paid which, if buying previously issued notes, means going into each one to inspect the terms.
IMO ladders work and make sense with a normal yield curve. Normal meaning longer terms pay higher rates. Right now that is not the case. IMO right now you just cycle through 1 month T-Bills until things change. Max rate and max liquidity. Why wouldn't you?
Do you ever buy FRNs on Treasury Direct and what’s the advantages?
Just. Bought som tb of 8&16 bout I’m ready tu use your recom that’s what I need until house market go down to my like of 50% like on 2008
So once the initial 13 weeks is up those also get reinvested in a new 13 weeks, correct? That would create the monthly on going availability of cash if needed.
Great video, Subbed your channel. Gonna take the 4-8-13 week ladder challenge !
Welcome! Glad to have you here! Just make sure the ladder you build fits within your finances and all the goals you have and you'll be all set
Want to start a ladder…not sure what maturity lengths to choose though 🤔 is short term better or long?
Can i use this auto invest feature with Fidelity?
Are there strategies on how to ladder with ETFs
Left out 17-week security?
Ok soo if I put just 100 in a 4 week bill, how much would I get on average? Im kinda new to this lol
Is there a way around the 10 million limit?
I'm building a super aggressive T-Bill ladder. Doing only 4 week T bills. I just started my first one last week invested $5,000. Adding another $2000 today, 2k next and week after that. The plan is to have to the point where I can pull out of at least one T bill at any point. I will be aggressively dumping cash into T bill for the near future. In May putting 8k more and waiting for tax return so I can also put that in. After that I plan on putting an extra 3k a month. Not big on stocks so don't really care to much about them. I'm more looking for short term returns. If I can get 20% or 3% a month that is all I need. I will continue to add 3k a month for the next 10yrs. Super blessed that being an RN allows me to be able to dump so much money in investing. Don't have a bunch of bills so I just have to stay super strict.
That's awesome you've got so much money you can put into it! I wouldn't totally write off stock though. They're going to do a lot more for you long-term than T-bills will
@@JayFairbrother As I am not US citizen and live overseas I can't invest directly into T-Bills. However I can use a T-Bill ETF. However I don't fully understand them. For a 1-3 month ETf like CLIP, how do you know when to exit as they are a mixture of durations. Do I purchase and then wait 4 weeks or 13 weeks? I find them confusing. . Are there distinct duration ETF's which are just 4 week or 13 week? Sorry to be a newbie on this
@@jezeales652 ETF's like that will hold a mixture of different Tbills at all times. Many people use those tbill etfs as a place to hold short term cash as an alternative to a bank account.
As a non US citizen you CAN buy individual Tbills, just not through treasury direct. Depending on what stock brokerage you use, you should be able to buy individual tbills there.
Thank you for your video. Question…If the 4 and 8 week interest rates are similar, why not just take the gain + initial investment after 4 weeks and purchase another 4 week again. What is the advantage of the 8 or 13 week, if the rates are so similar?
rates change. 4 weeks may equate to less gain if rates drop. While 8 week holds that gain longer.
The title says 2024. I don't get it. There is an inverted curve where shorter term maturities currently make more than longer term. So, why would I buy a tBill at 52 weeks when 4 week autoroll tbills are higher. I'd much rather have access to my money every 4 weeks and get a higher rate then a year.
Thank you for this great video! What I don't understand is how do we get to 5% interest on 13 weeks biil? They sell it for $98.67 so how am I getting 5% interest here?
It’s 5% per year, not 5% per 13 week period. So you are getting 1.33 per 13 week period. Multiply that by four 13 weeks periods, and that gives you your 5% “annual” gain.
Should I use the auto-roll feature Fidelity offers when buyin t bill ladder?
If you want to automatically reinvest into the same length Tbill you can
I was just confused why the example shows buying a 13 week t bill after the 4 week t bill matures?
Its easy to get your money on maturity on a CD. You just go to the bank. How do you get your money when a t bill matures? How do you move a 4 week t bill to 13 weeks at maturity?
The money is automatically deposited back into the account it originally came out of when a tbill matures unless you have it set up to auto-roll into a new tbill
You said we are FDIC protected per CD (go to minute 3:27). Actually, you we FDIC protected "per depositor, per institution".
You’re right, good catch!
Thanks for sharing. So I'm confused, from what I see, it looks like the month and other durations provide the same amount of money. So if I buy a 1 year vs a month, am I counting on gaining the interest state plus inflation? If not that, then what is the benefit of locking my money up for a whole year instead of rolling over month to month to use the compounding effect?
With a 1yr you're guaranteed that rate for the full 12 months. With month to month the interest rate will change with each month's new tbills & the rate you get next month could be significantly lower (or higher) than the prior month. Either option could be better or worse than the other as it plays out, but it's hard to know ahead of time
@@JayFairbrother thanks, that makes sense. Do you find investing in T-Bills actually grows your money or just keeps up with inflation?
@@Devin82m Theyre not going to make you rich. I treat them as a secondary emergency fund. It's just good to get a ~5% return with next to zero risk involved
In addition to the fiveT-bill durations, that you stated, is there also a 17 week T-bill?😊😊
Yes, there is a 17 week bill. So my ladder started with 4, 8, 13, and 17 week bills. So there is a continual process of one bill maturing every month. As long as I feel like it, I just put that matured money into a new 17 week bill, until all four of my bills are 17 weeks in duration (yet one of them is maturing every month). If I have extra money, I'll just increase the amount of the next 17 week bill I purchase - I don't want a 26 week or longer tbill as I expect interest rates to begin dropping later this year.
Wow that's impressive, how do you make that much monthly? I'm 47 and have been looking for ways to be successful, please how??
Can I purchase T bills from my Traditional IRA at my brokerage account and just ladder them inside the IRA. I am retired and Draw from my Money Market Fund when stocks and bonds are down. Was thinking of setting half to automatically reinvest to keep it easy. I would expect the T bill ETF to out perform a money market fund. Any reason not to do this?
You can buy Tbills in your IRA...you'll be able to buy either primary issues like in Treasury Direct, Tbills on the Secondary market, or even in ETF form. Only reason not to do it is if you thought that money would be better invested in another way I guess
When buying T-Bills, can you buy more or invest more money into that same T-Bill or is it a one time purchase locked in. Ex. I buy a T-Bill for 1yr maturity with 1k can I contribute another 500 into that 1k?
Once the Tbill is issued, no. Any further money you put in would be to a new issue from a different auction date
Your thoughts on a 4 week tbill ladder x 4 or 6?
It'll be the ladder that will keep your money the most liquid, you'll earn slightly less than a ladder with some of the longer maturities involved as a trade off though. Just a matter of which is more important for what you want out of it
Do T-bills compound interest like HYSA?
No, they only last for the duration you buy and pay out the interest at the end of that period.
Can you just withdraw the interest and reinvest as mentioned to establish passive income every 5 weeks?
You can, but that makes it all a much more manual process. This way I just set it up to auto-reinvest once I’ve got the 13wk Tbills rolling
Great pacing, great production, great info. Subscribed. I went through vanguard and am currently rotating 135k in 13 week t-bills. Getting 400-500 per month at current rates. I realize this is quite a bit to have tied up in essentially cash. Sadly houses are expensive in CA, trying to save up a downpayment.
Thanks for the kind words! It's not a bad thing to have that much tied up in "cash" when there's a clear purpose for what the money is for though. It's definitely better to exchange some possible earning potential of the money for the safety and piece of mind that you're not going to lose your downpayment money and delay buying a home by that much longer
Are you only using the 13-week T--Bills to construct your ladder? If so, how did you design to pay monthly?
@@lambo650ER Make three t-bill purchases and space them out a month apart.
Do you split up the 135k between the amount of T-Bills you purchase or do you put it into one T-Bill?
@@twissol2494yah, divide the 135k by 3 and that is your purchase amount each month. So buy 45k worth each month for three months. As soon as one matures, buy another for 45k + interest earned.
After the four week T bill matures you mention you put it into a thirteen week bill. How are you able to do this when you have to hold the four week T bill for at least 45 days?
? The 4 week tbill matures after 4 weeks…
The 45 day caveat is for transferring a T-Bill from TD to a bank/broker to sell on the secondary market, regardless of term of said bill. Say if you got a 52 week bill, you'd not be able to transfer it out til the 45 days are through.
you said this 3 times and i am still confused about it, if I hold 10k in T-bills. and the interest rate moves up or down. does this matter to me at all if I plan to hold to maturity?
If you hold to maturity it doesn’t matter at all if the interest rate for new Tbills goes up or down.
is it best to buy t bills in an IRA or individual account?
Maybe this is a dumb question but -- as far as laddering goes shouldn't you just theoretically buy a new 4-month T-Bill literally every single day instead of having them spread out by 4 month intervals (a 4 and an 8 and a 13) so that way you can more quickly put the compound interest to use?
You can build a ladder any way you want really. With whatever durations work best for you, this is just what I chose for myself
I guess a better way to put it is, since the yield curve is currently inverted, instead of laddering shouldn't you just buy a 4-week bill (since those currently have the highest interest rate) and when that matures just buy another 4-week bill and on and on and on until the yield curve stops inverting? Why, for example, ladder a 4-week at 5.3%, an 8-week at 5.1% and a 13-week at 4.9% when I could instead just keep buying the 4-week bills at 5.3% (the highest interest rate of the bunch)??? @@JayFairbrother
Great video! Well explained! The methodology behind you constructing the ladder the way you did is because we don’t know what interest rates are going to do week to week. Obviously, if you knew that interest rates we’re going to continue to go up, you would want to be in a short term T-bill and if you knew that interest rates were going to go down you would want to be in a long term T-bill. And so what you’ve done, is you’ve laddered the duration of your T-bills so you can capture the benefits of interest rates going up and going down.
What can I generate annually with 600k cash? When can I withdraw the interest and what rate will it be taxed at? (Assuming that’s only income made)
What you can generate depends on the length of the Tbills you buy & the combination of rates. If you hold to maturity it’s taxed like any other interest income except no state/local taxes
@@JayFairbrother let’s say I build a ladder or buy 1yr and average 4.5%. That’s 27k profit less 12% in federal taxes? (Assuming no income or job, only bond interest)
@@JayFairbrothero
When you say I repeat the process…you start again with another ladder or just keep putting 13 week again and again. So why not put 13 weeks Tao repeat 4 times ? Confused.
Also confused
If we invest $10k into this t-bill ladder in December 2023. Is that money still taxable as income for 2023? Or are investments somehow written off? Sorry, but I’m brand new to investing and I’m trying to learn.
Taxes are due when the tbills mature. So if that doesn't happen in 2023 you won't owe any taxes on them in 2023. You'll get a tax statement from your broker or Treasury Direct for anything you owe, so just follow what that says
Hi there I really love the video. But I have a question, and maybe it is stupid and I just dont understand. Why not just buy 4 week tbills with these rates?
I have 10k if I did a tbill ladder:
Week 1 (3) 4 week t bills
Week 2 (2) 4 week t bills
Week 3 (3) 4 week t bills
Week 4 (2) 4 week t bills
Etc, repeat.
Does that make sense or is it just dumb? With my calculations every 2 months you’ll be able to add another T bill, then every month, then 2 a month and so on after about 24 months
You can build a ladder any way you'd like. That's the beauty of it is we can each tailor how its built to our specific wants & needs
@@JayFairbrother Thank you for the response Jay!
@@foxyepoxy602 no problem, dont hesitate to ask if you have any other questions!
I just saw there was a 3 day t bill listed (912797MF1), which I've never seen or heard anyone reference before. Is that something unique, perhaps to do with the debt ceiling vote or maybe something underhanded?
Where are you looking that you see that? It’s likely a Tbill on the secondary market that only has 3 days left until maturity
@@JayFairbrother It was on Treasury Direct. The number I included above is, I'm not sure what it's called, the serial number?
@@marcushoward6560 I'm not really sure. I just went on Treasury Direct and I don't see anything shorter than 4 week listed
@@JayFairbrother I just went and looked at the most recent auctions but this time it was listed on the CMB tab, although it wasn't yesterday. I'm just now learning about T bills so I haven't bothered looking at CMBs). I see there is a one day bill today, but is also a CMB, apparently. I guess those are bills, but not specifically, t bills.
So after your initial 13 week tbill matures do you roll that into another 13week tbill. Then moving forward you constantly have 3 separate 13 week tbills going at the same time?
Exactly 👍
Thank you.
after maturity does the money go directly to my bank? or do i have to sell it somehow?
All the money will go right back to your bank
Thankyou for your question, i was going to ask the same 😊
What type of money you throwing at these bills ? Like say for instance I had a friend with 200k
If you want to keep 200k safe and relatively liquid it’s totally fine to put that much into them. If you’re more worried about getting the highest possible return then there are probably better places
@@JayFairbrother he actually has 300k and is taking about cashing out property bur I don't think prices would be good enough till a year or 2 after this looming recession , I already informed him about series I vonds bur now that he told me he has that I'm looking for good options
@@JayFairbrother what would be the better places? I have $400k and was going to do your ladder because we want to buy a vacation property sometime late this year, early next year. I'm a relatively conservative investor - max out my 401k, have more than 12-months emergency savings. It's the $400k from an inheritance that I want to use to make money so we can buy our vacation property. What's a better place than t-bills for that money in your opinion? And thank you for sharing your knowledge!
@@KathySchwartz If you want to buy the property later this year I think T-bills or even just a high yield savings account are probably the best place for the money you're going to use. It's more important not to lose that money than it is to get any sort of return on it.
My other comment was about if you had $400k and all you cared about was earning the most you possibly could on it as an investment. Then you should probably go for something higher risk/return than T-Bills.
Is the interest rate is 5% on the 8 weeks, does that mean 5% at the maturity date?
Interest rate is the annual rate. So you'll get 8 weeks of the 5% rate if thats the length you buy at that rate
Essentially if the interest rate is 5% for the year, you divide that by 365 days to know daily interest, then you multiply that by how much your investing and then multiply that by the days to maturity
When in the cycle to you buy another 4 week? You buy a 4 an 8 a 13. Then when the 4 week matures...what do I buy? Another 4 week?
The way I'm doing it, when each of the original 4, 8, 13 week T Bills mature I'm buying a new 13 week with each of them. So After the initial 13 week period, I'll have a new 13 week Tbill maturing every 4-5 weeks.
@@JayFairbrother oh I get it. Thanks
@Jay Fairbrother Are you at all worried about the debt ceiling probs? Like if they decide to just shrug off all this money owed?
@@mickeyflanagan4019 I actually just put out a video where I talk about what I think will happen ua-cam.com/video/4zoOK1UvEBE/v-deo.html
@@cjjohnson7095 The good thing about Tbills is they're so short, so even if it ends up being a mistake, you're getting your money out of them in a few months, tops.
Why not just use a laddered TBill ETF?
No reason to pay an etf fee when they're so easy to buy/reinvest on their own. Maybe if I was committed to being invested in a t bill ladder long term an etf would be a better option
I am going to build a t-bill later
Hi, may I ask one question here? Could I try the same process with 26 week t bill? Like use this ladder to do all 26 week t bills? Any difference between ladder 13 weeks t bill vs 26 weeks t bill vs 52 weeks t bill?
You can do it with any length you choose, it's all just personal preference
Answered lots of my questions! Excellent video! Thank you!!
Glad it was useful! Thanks for watching!
Is TBills still safe if US government goes into default?
Outstanding Tbills probably wouldn’t be, and they’d likely stop issuing new ones. But if that happens we’ll all have much bigger problems on our hands anyway
*snort... They're not going anywhere... Neither is the FED (whose coattails you're riding on for the interest rates)... Besides, if that does somehow happen, everyone would have a lot more pressing worries than failed govmt. bonds/bills...
Do I have to ladder? Can I just buy 1 for 10,000 pros/cons?
Nope, you don't need to ladder if you don't want to. It just gives you a bit more flexibility over the interest rates and how long your money is tied up is all. But there's absolutely nothing wrong with just investing a lump sum either
I was wondering the same thing! Also maybe for some it would be easier to just do one a little longer say 13 or 17 weeks. Then having to remember to go in every 5 weeks to reinvest. Also Jay you said you reinvest all the money plus the interest you make. If they money goes back into your savings account how would you keep track of the the different interest you make off of your different ladders? In other words how would you know how much profit you are making on each one?
@@sunnychic845 When they issue the Tbills, they debit your account. What I do is take the difference from what they debited from the principal and move that amount over to a separate account. A little tedious, but I can't think of a better way to track it. My bank is going to hate me for the number of ins and outs that will be taking place this year, I just jumped all-in with both feet.
Why not just use 100% of your cash to buy every four weeks? The motions are the same, except you don't have to wait 13 weeks to be completely liquid. What is the advantage of locking up 66% of you cash? I don't think the rates are any better on the 8 and 13 week bills. I have searched for this answer and can't find it. So I simply buy T-bills from my brokerage on the secondary market with a 4-6 week maturity and set a calendar event. When mature, I can buy more, or move it elsewhere.
How is this method working out for you?
@@RayRiv73 Great, so far. I had my last purchase mature on 12/26 at 5.38%, then I immediately bought more that mature on 2/13 at 5.35%. I set a calendar reminder and forget about it. It's really easy to research & buy T-bills at my brokerage, too. Like a 5 minute process. I'll keep doing this until the market isn't so over valued or T-bills are below 4.5%.
Can someone help me understand why you buy 4 same timed bills after renewing? (4wk, 8wk, 13wk, 17 wk to start) for instance. Then he says when the 4 wk matures you buy 13 wk and then 8 week matures you buy 13 week. Then you are all stuck with the same timed payouts right? Or i guess they will mature at different times but take the same length to mature. Just found it odd you wouldnt then buy another 4 week with your 4 week. Then another 8 week when your 8 week matures and so on. Just spent $40,000 (10k 4 week, 10k 8 week, 10k 13 wk, 10k 17 wk!!) so want to make sure im doing it right. Any input appreciated! Anyone please help or comment.
Because after the initial purchases, buying all 13 week Tbills gives me one maturing every few weeks because they're on different maturity schedules. So it's like owning shorter duration tbills with the benefit of getting the higher interest rates that (usually) apply to the longer duration tbills. You can set it up how ever it works best for you though, this is just how I chose to do it!
Wow great video! Thank you so much. So are you saying that a 4 week T-bill will pay me 4% interest in 4 weeks?
The interest rates are annual rates, so a 4 week Tbill will pay you 4 weeks worth of the interest rate it has
@@JayFairbrother That is so clear and I finally get it. Thank you so much.
There are also 17 week t bills. Why not roll the first 4 week to a 17 week and so on? Youde still get 4 week maturity
I wanted to stick to the shortest maturities, but that's the beauty of laddering them, you can mix and match to create whatever yield/duration you're most comfortable with
When you say a purchase limit of 10 million on T-Bills, can't you just buy different T-Bills if you have over 10 million?
Yes, it's $10 million per duration (4 week, 8 week etc...). I just didn't think too many people watching would have to worry about the finer details of that :)
@@JayFairbrother Also, the 10M is only applicable to new issues, not reinvestments... If you had a rolling 10M Tbill, you could still buy another 10M at the next auction and get two issues at the same time.
@@noydbwia I actually didn't know that! Thanks 👍
I keep looking at his watch. Looks like a Rolex but the band is throwing me off.
It’s an Omega Seamaster
17
Thank you. I'm so glad I found your video! Question: In your ladder above, why do you re-invest the 4 wk, 8 wk & 13 wk bills ALL into new 13 wk T-Bills rather than new 4 or 8 wk ones?
Because the longer length Tbills have higher interest rates, so after those original 4 & 8 weeks mature, I get a better overall interest rate re-investing into 13 weeks, but still have a Tbill maturing every 4-5 weeks because I'm now 8 weeks into that original 13 wk Tbill I purchased as well.
@@JayFairbrother I’m trying really hard to learn all of this, you for your videos!
@@JayFairbrother The 8 week t-bill I got issued 3/14 is giving a higher yield than the 13 week which is being issued 3/16. Why is that? Inverted yield curve!
@@raekc4839 It is rare. that is why I am buying a little. too good to pass up.
Is it better to buy T-bills from Treasury Direct or from my brokerage like Schwab or Fidelity? Is there a difference in price?
TD let’s you buy in smaller $$ amounts for new issues, other than that no difference in price. A brokerage like Schwab or Fidelity will let you buy/sell Tbills on the secondary market just like stocks
How much can you make on this method with 50k to start?? 🤔
At 5% well, about $2,500 annually. If you have $50k that you don’t need it should be in the stock market.
@Bob-li5vs what an awful return thanks for the math bro. Isn't s&p average at 9-12% ??
Great video Jay. It was very informative and definitely something I will be looking into.
Keep up the great content 👍🏾
Thanks Ken! Lots of different investments are looking more attractive now with higher interest rates. 👍
I think I'll do this with the 17 week t bills.
I'm new at this, bought $2000/ 8wk and $2000 / 4wk both to reinvest 2 times. When it comes to paying taxes at the end of the year how do I go about it? Does the Treasury send a tax form like the W2 from your employer..so basically wait for it in the mail and if not what form is it and where can I get it?
Thanks and sorry for all the questions
The treasury will issue a 1099-INT form for your taxes. The same form you'd get from your bank if you have a savings account that pays you interest. They should mail it to you, I'm not 100% sure if there's also an option to download it yourself from the website or not.
@@JayFairbrother will the treasury send one 1099-int for all the T-bills that you cycled through that year? or will be an individual form for each t-bill you bought, then reinvested into. For example, the ladder, you go from 4 four week to a 13, and repeat. Will that be 2+ forms, or would that be captured on one form.
@@TylerA3 one form, easily downloaded
Hello Jay, I have a doubt. I'm going to buy some bonds trough Interactive Brokers. I'm US non-resident. Is there any US Withholding Tax when maturity? I mean I know notes and bonds, as they are paying every 6 months or so, or even dividends you have a US Withholding Tax of 30% or 15% depending if your country have a treaty with the US. But this T-Bills seems like you buy a stock and sell later, and I know in this case there's no US Withholding Tax.
I have a noob question but if I go into a four week t-bills let it mature to the 4 weeks and cash out is the initial investment available and the interest made available after 4 weeks or is there a waiting period for the interest ?
No waiting period other than the time it takes for money to transfer. So once it matures the whole amount principal + interest earned is deposited back to your bank account
When you buy a T-Bill, you don’t pay the full amount up front. For example, if you buy a 10K T-Bill, you end up paying 10K less the interest up front. At maturity, you get the full 10K back. So you’re really getting the interest up front. Also, if you sell the T-Bill before maturity, you’re likely to lose some money there.
You'll know the interest when the bill is issued, because that's when they debit your account for the sale price. The difference between the sale price and the par value (your principal) is where the "interest" derives from.
@@Itzdavide That's what SVB did... It was only after they failed that I was like "how do you lose money in Treasuries??" Did a ton of research and now I'm all in with the short term stuff
Wish we could see actual setup of the ladder. Is there a way in Treasury direct to roll a 4k to 13wk or would you have to manually set up after maturity? Is there a fee to deposit the money from bank to treasury and vice versa? Thanks
You have to manually buy the 13wks after the 4 & 8 mature, but you can use the auto-reinvest after that to keep buying new 13wks. No fees to move money back and forth from treasury direct
@@JayFairbrother Excellent. Once I have those initial 4 week and 8 week T-bills rolled into a 13 week, the TreasuryDirect site allows for auto-reinvest? From that point on it should be on autopilot?
@@DavidGrand-PDX Yep! Once you're up to the longest length of your ladder you can just use the auto-reinvest feature on treasury direct to put it on auto pilot. Don't do it beforehand though because it buys the same duration tbill as is maturing
This is literally the video I’ve been needing with the whole possible looming idea of the our government defaulting on Debt I was wondering what would happen to My T-Bills thank you for this insight also if you don’t mind my asking where do you buy/auto reinvest your T-bills could you attach a link? I use public? What is your opinion on public TBills
@@JayFairbrother Can I send the proceeds from the 4-week T-bill maturing to Zero Percent C of I for use in purchasing the 8-week T-bill on the same date? I don't want to lose a weeks time/interest waiting for the funds to settle for the next purchase.
Terrific educational - Now is it possible to build a ladder where you've got 26 week T Bills maturing on some regular schedule, say every 5-8 weeks?
I'm sure you could, you'd just need to play around with the timing of when you buy and the exact maturity dates you're choosing
This is great information, thanks Jay
Amazing videos! Love the comments too, so helpful! 🏋️♂️
Hi Jay, thanks for these videos! I'm hoping you can review my understanding of your advice:
1. Buy T-Bills of 4 wks, 8 wks and 13 wks on the same day
2. After 4 wks, buy a new 13 wk T-Bill with the 4 wk money
3. After another 4 wks, buy a new 13 wk T-Bill with the 8 wk money
4. After another 4 wks, buy yet another new 13 wk T-Bill ad infinitum...
Is that right? Or are you saying that? Or this:
1. Buy T-Bills of 4 wks, 8 wks and 13 wks on the same day
2. After 4 wks, buy a new 13 wk T-Bill with the 4 wk money
3. After another 4 wks, buy a new 13 wk T-Bill with the 8 wk money
4. After another 4 wks, buy a new round of T-Bills of 4 wks, 8 wks and 13 wks on the same day
Also, can you spell out exactly which of the bills you are auto-reinvesting through TreasuryDirect?
Thank you!
I'm doing the first version. Buying a new 13 week tbill after each initial tbill matures (and so on). At this point I just have treasury direct's auto re-invest turned on so my 13 week bills automatically roll into a new one at maturity
@@JayFairbrother thanks!
Follow-up question: I currently hold three 13-week T-Bills, each with three re-investments scheduled, each spread out by 4 weeks (approx). So this is happening automatically. At what point do I have to go in there and adjust the settings manually? Do I ever purchase another 4-week or 8-week bill for the ladder? Or do I just keep re-investing the 13-week bills that are spread out by 4 weeks? Thanks for clarifying!
You read my mind brother! I am already in a process of building one
What’s yours looking like?
6:45 not true about the 10 year.
it's typically true...we're in a weird market right now where the shorter maturities are actually paying better than the 10 year. But it's somewhat of a rare occurrence that this happens
Why don't you invest all of your money in 4 weeks t-bills? You are liquid and can quickly adjust to interest rate change
Great video. I'm doing this exact same ladder strategy of 4/8/13 on Fidelity.
Can you auto invest Tbills in Fidelity?
does the issue and maturity matter date matter if i am comparing t bills of the same duration? i see many 4 week t bills with different issue dates. does it matter which one I pick?
They'll have slightly different interest rates because they're different issues. But otherwise no, not really
I think this is a great video for first time investors and a very well-thought and conservative strategy to building investment wealth, thank you.
Glad you enjoyed it!
T-Bills seem only practical if you have atleast $25,000 to spend, otherwise on these short term bills 4-8 weeks you’re barely cracking $100-$200 ever 1-2 months. I suppose with a ladder this does begin to add up quickly overtime if you reinvest.
Yes, that's true. The only way buying T bills makes sense and pays a decent amount of interest is by using alot of leverage. By that I mean using a large principle balance to buy $100k+. Then take the interest paid and reinvest it. But it's pointless to bother with small purchases of t bills. Either go big or why bother?
I disagree. I have 4k just sitting in a savings account for a rainy day. Would I rather get $0.82 a month from my savings account or is it worth a bit of my time to get quite a bit more than that. @@SteveSwanson88
if I can make 4 bucks instead of .04 cents, or $41 instead of 40 cents in my bank bs money market and it takes 1 minute I’ll spend the minute
I just park cash there to make some extra interest , even though I have plenty, 40 bucks is 40 bucks and save on state tax
I bought a 4-week T-Bill on Fidelity as an experiment. I'm thinking about experimenting with a three month T-Bill ladder through Fidelity to see how that works. In this rising rate environment, shorter duration would be wise, IMHO.
Exactly, stick to the shorter durations so you can keep capitalizing on the rising interest rates 👍
@@JayFairbrotheror hold some of your money in a money market fund like VUSXX, SPAXX, FDLXX for instance. They are paying slightly less than Treasuries, but not so much so that one is not losing an opportunity to capitalize on rising rates.
Thanks for the post so informative. Subscribed
So on treasury direct, do you click "schedule reinviestment"?
Underneath the "schedule reinvestment" you need to click on Yes. To right of it, in that square box, you need to type in how many times you want to reinvest. It says bills may be scheduled for reinvestment for up to 2 years.
if you want treasury direct to re-invest into the same length T-bill, yes. I click that once my shorter duration tbills mature and I reinvest into the 13 week ones for my ladder.
@@JayFairbrother Ok so check that "Yes" box once we're into the 13 week T-Bills, but for the initial 4 and 8 week ones we manually reinvest into the new 13 week T-Bill. Got it, thanks!
all that for $100 in interest
Just subscribed! This clearly presented information deserves a sub ☺ Keep it up!👏
How about 3×13 week t bill ladder with a month apart from each and auto roll when they mature?
Bill A Jan
Bill B Feb
Bill C March
April A matures & reinvest
May B matures & reinvest
June C matures & reinvest
July A matures again & reinvest
So every month, I'll have cash flow + get high interest available on the next re-invest.
Thoughts?
As long as you don't mind locking your money up for that first 13 week period it's a fine way to do it. All that matters is that the ladder works for whatever you want to be getting out of it!
@@JayFairbrother Yeah since this an emergency fund storage location for me, I would want the 4 wk, 8 wk, 13 wk and then do a manual conversion of the 4 and 8 into 13 wk as those early T-bills mature. And then after that use the auto-renew feature on the three chunks of money with each at 13 weeks.
You never know when an emergency will come up so I will be doing the shorter maturity dates early in this process of building the ladder.
Was looking into the t-bills recently. Thought there was also a 2-week maturity t-bill. When I looked the 4 week t-bill was paying the highest interest. So if I was just getting started go all in on the 4 week t-bill until the interest on the longer term t-bills is progressively higher rather than lower.
4 week is the shortest. Typically the longer Tbills will pay higher interest, but every now and then there can be weird fluctuations where that's not the case
You won’t be getting the full 5% yield, 5% is annually you’ll be getting .41%
Isn't anybody conc
Hey thanks for the video, very good ! One question, in terms of caos in the markets ( for example 2008 financial crisis ) having cash sitting on the account, or money market or t-bills or a JPM bond, or HY savings or bank CD aren't all these the same ? I mean real CAOS, like biggest banks with problems. Because at the end aren't all these invested by someone in t-bills ? Most of these at the last last line aren't sitting in short t-bills ? Is the risk all the same ? T-bills would be the laaast frontier, beyond that nothing ? This could be a great video explaining. Best regards !!
I decided to turn Treasury Direct into my new savings account... Why accept the paltry APY the bank gives you when you can front run them and the the t-bills for the same thing they're doing it for and giving you a shave of the proceeds? I stripped both of my SA's and dumped it all into 4 week bills on reinvestment and am on my way to making more in interest than if I kept it in the bank. An added + to this is that I don't have to worry about the stability of the Treasury as it literally would take a nuke to end its' run (as well as the FED).
I currently have a 4 week ladder where one matures every week. I also have a few 8, 13 and 17 week t-bills but the bulk of my cash is in the 4 week bills.
I took that a step further and am buying a new4 week tbill every week and having it reinvest, with the final maturity being in December, that way, there'll be multiple maturities/reinvestments taking place on every Tuesday for the rest of the year... I started out with the 4 week, but I've since decided to spread out to everything except the 52 week bill. End of year looks like 20k-30k+ of rolling multi length bills all coming in for landing in a very busy December.
Hi Jay great content! Question, if you want to autoroll, does Treasury Direct reinvest your fixed amount plus your profit? Or do they put the profit back into your bank and just reinvest your original amount? Thank you.
It depends on the cost of the new Tbill compared to your original one. It will buy the same face value as your original, but some of your interest earned on the first one may need to be rolled into the 2nd one depending on the rate change
@@JayFairbrother Okay thanks so much!
The stock market is only good if the FED manipulates interest rates and supplements the economy with electronicly printed money that eventually makes it into the stock market. So, don't act like the stock market is legit😂
Liking the 17 week T-bills now for higher rates
As we get closer and closer to the (proposed) peak of the interest rate hikes the longer duration T-Bills will start to look more and more attractive so we can lock in those high rates for as long as possible
This guys a mad genuine person helping his fellow man! Greatly appreciate your channel for being available to access and helping educate such a tedious process with simplicity 🤝👑
Thank you, I appreciate that!
Jay, I love your content. Cannot get enough of it.
I just did this with my emergency fund (a true 6-9 months of all family expenses, mortgage included). I purchased a 1 month, 3 month, 6 month and 9 month CD through my brokerage account at differing interest rates of between 4.2-4.881% APY. This is in addition to my i-bond max out and routine stock account/Roth Ira contributions.
Well done! Can't beat the feeling of that kind of security
23 seconds into your presentation and you made an error. There are actually six maturity dates. There’s a 17 week, as well, which is new this year.
One advantage of T-bills over CDs and savings accounts is tax free by your state and local government. If you live in a an income tax-free state, that’s not an issue for state taxes.
Yeah, thanks for pointing that out. I forgot about the new 17 week Tbills until I had already uploaded the video. I did mention the tax advantages in this video. As someone who lives in NY, that's a major reason I'm keeping more in TBills!
Thank you for your video! It's explained very clearly and well! Can you please make a video of how you can make an auto payment while doing the ladder on Fidelity account please.