Treasury Bill ladder

A bond is a loan made by an investor to a borrower. It pays out a fixed income based on a fixed or variable interest rate and loan term.

There are different types of bonds:

- U.S. Treasury

- Municipal bonds

- Corporate bonds

Bonds are traded on the bond market rather than the stock market. They are issued at specific times by the U.S. government or other entity.

You can buy them from Treasurydirect.gov or from a secondary broker like Fidelity, Charles Schwab etc.

Treasury bills aka T-Bills mature in one year or less and are sold at a discount to their face value. They only pay out interest at maturity. 4,8,13,17,26 or 52 weeks.

Treasury notes aka T-notes mature in 2,3,5,7 or 10 years. Considered intermediate-term investment. Fixed interest payment twice a year until maturity.

Treasury bonds are long-term investments maturing between 10-30 years. They pay a fixed interest twice a year.

Specifically talking about US bonds. They are much more secure than stocks. When you buy US bonds you are supporting the US government and therefore the people. They are backed by the US government.

Bonds provide individuals cash income. Most of them have a fixed interest rate. You are not buying them for growth.

When US interest rates are low bonds pay out less when the interest rate rises they pay out more.

Right now US citizens are in an environment where the interest rate is rise and will continue to rise for the foreseeable future. You could start buying bonds now and keep buying as the interest rates climbs and then stock buying when the interest rates goes back down later.

If you are buying from treasurydirect.gov Bills, Notes and Bonds are auctioned.

Treasury Bills - Weekly, Monthly

Treasury Notes - Monthly

Treasury Bonds - Monthy

Treasury tentative auction schedule

https://home.treasury.gov/system/files/221/TentativeAuctionScheduleQ32022.pdf

Treasury recent auction rates

https://www.treasurydirect.gov/auctions/announcements-data-results/

There is an inverse relationship between bonds and the market is inverse.

As the Federal interest rate rises, the market value of the bonds you currently own goes down. This is if you were to sell your bonds. You can always keep holding the bonds till maturity and your bond payout will not change.

Right now T-Bill interest rates are pretty good, in my opinion, 3-4+%. That is a pretty good guaranteed yield.

I also had little bit of extra cash in my savings account that I was willing to part with. I have started with $1,000 per T-Bill purchased.

If you buy from TresuryDirect.gov you can go as low as $100 per purchase.

Remember T-Bills mature every 4,8,13,17,26 or 52 weeks. They are a short-term investment. I want the flexibility to reinvest in something else when they mature. I personally am going with 8-week T-Bills.

Your T-Bill ladder just means that you will buy T-Bills based on your circumstances and the market each month. You want to buy and hold till maturity.

Month 1 - Buy 8 week T-Bill

Month 2 - Buy 8 week T-Bill

Month 3 - Buy 8 week T-Bill - Month 1 T-Bill matures, profits rolls into next purchase

Month 4 - Buy 8 week T-Bill - Month 2 T-Bill matures, profits rolls into next purchase

Month 5 - Buy 8 week T-Bill - Month 3 T-Bill matures, profits rolls into next purchase

Month 6 - Buy 8 week T-Bill - Month 4 T-Bill matures, profits rolls into next purchase

Month 7 - Stopped buying T-Bill - Month 5 T-Bill matures

Month 8 - Stopped buying T-Bill - Month 6 T-Bill matures

End of ladder

Right now the interest rate is rising. This will not always be the case. The US Federal Reserve has signaled that they want inflation to decrease and will keep raising rates till that happens.

That might be 6 months or 2 years.

My plan is to continue investing into bonds as long as the interest rate keeps going up and then phase out as the interest rate starts to go down again.

But I do not have crystal ball so I want to keep a lower T-Bill length. You may choose to go for a longer period of time.