Let’s just say, hypothetically speaking, you know someone who is selling their house. After the bank gets paid, this person could potentially be sitting on a large chunk of change.
Most of the time, the plan is to use the money as equity for the next place.
But housing is volatile right now, causing many recent sellers to hit the sidelines for a year or two while the market shakes itself out.
So to avoid being irresponsible and having more than $250,000 in your bank account, which is the limit on FDIC insurance, you need to think about how you are going to properly care for this very financially and emotionally important investment.
It needs a safe home. Here is a suggestion.
T-Bills Are Sweet
Sounds boring, right? But guess what, you are going to be loving the boringness of your bill a few years down the road when you get your full investment back plus interest.
Not only is this a very safe investment from a capital perspective, it is also very liquid, which means if you need to sell your bill early there will a market to support your transaction. You have options.
Here comes the best part.
You can buy one for free, there is no transaction cost!
You can purchase directly from the Treasury through an Internet auction site at Treasury Direct.
Or if you’re paranoid about setting up a bank account that is even remotely attached to the government, you can pick one up on the Street through your broker for $50. Either way, this is an inexpensive transaction.
With this simple purchase you have captured 4 essential components.
2.) Interest Returned
4.) Low Cost
*You can also buy bills that gain in value with inflation called TIPS*
Bonds always get a bad rap for not being the coolest kid at the party. But the bond is perfectly content to play his role, because he knows he is very good at what he does.
It’s a good fit for anyone who wants to protect an important financial and emotional investment.
10-Yr Chart of 1-yr. Yields