Safer Than the 60/40 Portfolio? US Treasury Bills Hit 5.14% — Highest Since 2007 – The Average Joe

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    Safer Than the 60/40 Portfolio? US Treasury Bills Hit 5.14% — Highest Since 2007

    victorlei

    February 28, 2023

    Cash is trash — no longer.

    Thanks to years of low interest rates, stock market returns outperformed keeping money under the bed in savings accounts.

    As interest rates rose over the past year, so have the returns on cash-like investments like Treasury Bills.

    So much so that the returns on these near-risk-free investments are higher than a typical 60% stocks/ 40% bonds portfolio.

    Let’s take a step back.

    US Treasury Bills are considered low-risk investments backed by the US government.

    Lend money to the government, and they’ll pay you principal + interest back.

    • The 6-month US Treasury Bills return reached as high as 5.14% yesterday — the highest since 2007.
    • It even surpassed the return of the popular 60/40 portfolio — which is yielding 5.07%, according to Bloomberg.

    Meaning: For the first time since 2001, it pays more to take less risk than investing in the 60/40 portfolio. But in the long run, US treasuries have still underperformed the S&P 500 — which has been averaging ~9%.

    How can you buy ’em?

    Investors can purchase treasury bills through TreasuryDirect or straight from major US investment brokerages.

    Alternatively, they can also get exposure through treasury ETFs.

    • A popular one is the iShares 0-3 Month Treasury Bond ETF (NYSE:SGOV).
    • Pays monthly dividends — currently yielding >4%.

    Need help? The Finance Buff has a great guide on buying them here.

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