Navigating the Treasury Trail: Setting up a Brokerage Account and Buying U.S. Treasuries 

Venturing into the world of government securities can be a prudent choice for individuals seeking a stable and relatively low-risk investment. U.S. Treasuries, in particular, are backed by the full faith and credit of the federal government, making them a secure investment. In this post, we will present a step-by-step guide for setting up a brokerage account to buy U.S. Treasuries and help you see what type of potential income you could generate in doing so.

Setting Up a Brokerage Account

The first step is to choose a reputable brokerage firm. Look for a broker with low fees, a user-friendly platform, and robust customer service. Once you’ve chosen a broker, you can create an account by providing the necessary personal and financial information. This process will include verification of your identity and financial position. Finally, once your identity is verified, you can fund your account via bank transfer, check, or other accepted methods offered by the broker.

Purchasing U.S. Treasuries

Once your account is created, it’s time to choose the different types of U.S. treasuries. These include bills, notes, bonds, and Treasury Inflation-Protected Securities (TIPS). Each has its own maturity term and interest payment structure, so be sure to research all the particulars so you can choose the best type for you. 

You have two options when it comes to buying: you can buy directly, or you can buy through a broker. If you choose to buy directly, you can use the U.S. government’s TreasuryDirect website. It’s important to keep in mind that you will need to transfer your investments to your brokerage account if you wish to sell them before their maturity. Alternatively, you can buy treasuries through your brokerage account. Here, you may have the option to buy Treasuries either at auction or on the secondary market.

The Income Potential from U.S. Treasuries

To better understand the potential income, consider a scenario. Imagine that you’ve invested $50,000 in U.S. Treasury notes. The choice of Treasury note would affect the yield you receive. Here are a few outcomes of the scenario based on different maturities and their respective rates:

  • 1-year Treasury Rate: At a rate of 5.44 percent, an investment of $50,000 would generate $2,720 in income over the year.
  • 2-year Treasury Yield: With a rate of 5.167 percent, the same investment would yield $2,583.50 over the two years.
  • 10-year Treasury Yield: At a rate of 4.71 percent, your annual income would be $2,3553.

Why Should I Invest in U.S. Treasuries?

The benefits of U.S. Treasuries largely lie in their safety and the steady (albeit modest) income they provide. While the returns might not be as high as other more volatile assets, the predictable income and capital preservation aspect of U.S. Treasuries make them a worthy consideration for more risk-averse investors. Moreover, the ease of buying them through a brokerage account simplifies the process, making it a straightforward endeavor for investors of all calibers. The key lies in understanding the nuances of these securities and aligning them with your financial goals to harness their benefits effectively.

How a Broker Can Help

If you’re not certain of the best U.S. Treasury investment for you, consult with a professional. DOAAR is a small business bookkeeping, tax and consulting services firm, with an additional focus on its clients’ personal finances. Specializing in bookkeeping, controller and CFO services, DOAAR’s offering spans daily accounting, month-end closing, complex financial modeling and oversight. From execution to analysis and strategy, DOAAR provides clients with a powerful and fully integrated back-office accounting solution. We have locations throughout California and the rest of the U.S. For more information, visit our website or call 888-405-0880.