Hi Chip,
I've never done treasuries before either. The 13 and 26 week bills get you that rate ad return your money. You pay a discounted value for them and get your money back to your bank at expiration.
If you have cash - it looks good.
Even though I do not like how our politicians blow money - we are the strongest country in the mix and that's all that is needed.
We have huge resources, that sadly get impaired for reasons other than corruption and insanity I do not understand.
If you buy a Treasury bond at a certain rate you get that rate guaranteed. I think the key is to try to catch a top in rates buy the bond, get that rate and as rates decline the value of the bond goes up. It can then be sold and if you own it for 12 months plus, the gain is a capital gain.
Show ne a 7% 30 year TREASURY, and it will gladly be my final Swan song.
That's a tough timing achievement and with our county's debt a BIG IF!
So the first thing is you must be happy with the yield. Then if you nail the FED trying to boost the economy with cheaper money (lower rates), you add the gain at a lower tax rate as frosting.
Very tough to do, but if you have idle cash, it's all plus money and quite guaranteed.
I've never done it. but have observed it over the many cycles in my 70 years. Slow adapter admittedly. LOL
The other route is to buy preferred stocks. Their dividends are taxed as qualified dividends (max rate of 20%).
I have had some good gains over the last 2 years and have bought some of those preferreds. I bought them when rates were dirt low, but was happy to get them. If you buy a preferred below the par price, it boosts the yield. Par on preferred is usually $25.00. With rates going up, most preferred are depressed and yielding in the 7 to 8 percent.
I have done that to the degree that if something happens to me, my wife has an easy job of clipping the 6 to 7% yield at a low tax rate (max of 20 %). Unless you get over the threshold where you pay for the Obama care ACA additional tax rate (around 3.7%).
Preferreds are usually good for a 6 year safety period. After that they can be called. You get your $25.00 par back.
It is not a big allocation but I try to set some things that are solid and reliable just in case something happens to me and my wife is a bit protected for a good number of years (with steady income and no need to sell at a loss other securities for living. That's just me and I didn't think that way when I was younger.
I have tried to accumulate the preferreds such that it covers my real estate taxes and utilities. That leaves our social security plus dividend income stream to live off of.
I'm not a registered advisor, but conservative, and that is how my thought process has evolved over the years.
Hope that helps you form an action plan on wealth accumulation for security in later years.
There are many other routes to take!
Bob
Alas age is making me far more conservative - it's really about time I'd say. <smile> |
