Government Bonds

Cities and states can offer bonds for sale to the public, but the investment instrument of choice for many Americans are bonds backed by good old Uncle Sam.  We’ll focus on those prevalent (if not profitable) “marketable securities” offered under the protection of the full faith and credit of the United States Government.  You may have noticed from the 30 seconds your local news dedicates to financials that there are different kinds of government bonds.  There are treasury bonds, treasury notes, and treasury bills (known to many investors as T-bills).

T-bills aren’t considered bonds from a technical standpoint because of their very short period of maturity (they mature in less than 1 year).  Treasury notes are the middle ground between T-bills and bona fide bonds.  Notes mature anywhere from one to ten years.  Securities called bonds by the U.S. Government will mature at least ten years from the date of issuance.  That is a somewhat technical distinction, and most investors lump them all together and call them bonds.

This section is intentionally short because these investments are never really a good idea as a large percentage of your portfolio unless you are about to retire, retired, or are placing risky bets on interest rates.  It is worth noting that placing risky bets in any market is stupid, and making risky bets on instruments regarded as “safe” is no less stupid.  Bonds do have a place in a well-balanced portfolio based on an investment strategy premised on what is called risk parity.  (We’ll get into that idea later; it’s a good one).

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