About U.S. Treasury Bond Funds
If you are a conservative investor who gravitates only to the safest choices, you might look into U.S. Treasury Bond Funds. They are mutual funds that only invest in securities that have been issued by the US Treasury. Although they ordinarily pay less than other investments, you will be comfortable in knowing that your money is working safely.
Other People Are Reading
-
Function
-
Most investors know that their holdings should be diversified in several ways. A portion of their investments should be made in securities that will be safe, regardless of the state of the economy. For that reason, many people invest in mutual funds that specialize in U.S. Treasury Bonds that are guaranteed by the government's "full faith and credit."
Types
-
Some mutual funds that invest in U.S. Treasury Bonds offer investors participation in securities that have varying maturities. Others allow investors the choice of maturities by containing securities that mature in five years or less, those that mature in five to ten years or those having maturities up to 30 years from the time the investor purchased them.
-
Considerations
-
The primary attraction of US Treasury Bond Funds is safety, but there will be times when their interest rates are considerably less than other investments. For that reason, a manager of a fund might add highly-rated corporate bonds to the government funds in order to increase the rate they pay. Such flexibility will be mentioned in the fund's prospectus. If you would prefer to own mutual funds that only invest in U.S. Treasury bonds, be aware of the difference.
Misconceptions
-
Many people believe that investments in U.S. Treasury Bond Funds are static, and they do not increase or decrease in value. This is not true. If interest rates on U.S. Treasury Bonds increase after an investment is made, the bonds included in the fund will go down in value. However, if interest rates fall, the investment will increase in value. For this reason, what you will receive from a sale of those mutual funds will be affected by general market conditions.
Benefits
-
Once you have decided to invest in U.S. Treasury Bonds Funds, you need to decide between those that pay a commission to the broker of your choice or no-load funds that are offered by mutual fund companies. The benefit of buying through a broker is that you will receive advice regarding your purchase. However, if you are comfortable in selecting mutual funds on your own, the cost to buy them directly will be somewhat less.
-
