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Great question! CDs are initially sold at Face Value. So if I purchase $10,000 worth of CDs, my initial deposit is $10,000, and I will receive $10,000 + $X interest back on maturity date. On the other hand, Treasuries are sold at a discount, so the initial deposit would be < $10,000 with exactly $10,000 returned on maturity date. Merrill Edge uses the same tools to describe both types of investments, so that’s how the offer prices differ!

Very solid plan Frederick!!

My pleasure!

Great question! You can find how long your T-Bill is “locked” for by looking at its Maturity Date. A new T-Bill that matures ~3 months from today is likely 13 weeks. If you’re interested in learning more about the Treasury Bill offering itself, each one has a unique CUSIP code that you can cross reference with Treasury Direct. Some Treasuries sold on the secondary market can be longer term securities (eg a previously issued 52-week T-Bill at the start of 2024 might be sold on the open market, even though it matures at the end of December) Hope that answered your question!

@@EricTangOfficial Thank you Eric. So I checked yesterday, and it said that I could purchase a new issue that would mature 8/22/24. And then under the issue date it said, 2/22/24. so this is why i was confused. if it's a new issue, then how was it already issued. Just wanted to get your thoughts on this. this seems like a 6 month t bill. i was hoping to purchase 1 month t bill. thank you

For simplicity, a pre-existing Treasury that matures on 08/22/24 functionally behaves as a ~ 6-week Treasury bill. If the yields are the same, it's functionally no different from buying a newly issued 4/8-week T-Bill on Treasury Direct. But to answer your question as to why the Treasury was originally a 6 month T-Bill, that comes down to the difference between "Competitive Tender" and "Non-competitive Tender" when Treasuries are first sold. Treasuries are actually sold to both institutions (competitive) and regular folk like you and me (non-competitive). Non-competitive bids constitute a very small percentage of the Treasury as we collectively don't have a lot of money. However, institutions will purchase Treasuries in very large quantities (e.g. Warren Buffet's Berkshire Hathaway in the millions of $$$) as they are much safer and more capable than bank equivalents. Fidelity is a large institution, so they can purchase large amounts of Treasuries via competitive bids at more attractive prices. Fidelity can then sell these Treasuries to their clients via "newly issued" Treasury Bills section or your normal Money Market Funds. It's a standard industry practice, and so these Treasuries retain all of their protections and properties as newly issued Treasuries. The only difference is from when/how they were purchased, which functionally has no impact on investors like you and me. Sorry if that complicates a little bit further! Treasuries are actually very complex financial instruments, but I try to simplify it to highlight the most important concepts. Very good question though & I'm glad you want to know the complicated details!

Oh wow. What a great detailed answer. Really appreciate it. So in this case, if I were to auto roll, it would be for 6 months, not 6 weeks correct? This is almost like buying on secondary market but from institutions

Good question Lila! The Treasury that matures on 08/22/24 is a re-issue of a previously issued bill. Because there are ~ 6 weeks left from the maturity date, Fidelity's Auto-Roll feature will prioritize rolling into another 6-Week Treasury security. Because it's at a weird number (not 4 or 8-weeks), Fidelity might purchase another re-issue the next time. If it cannot find a suitable alternative, they may automatically cancel the Auto-Roll. We're in a week with a federal holiday (July 4th) on a Thursday, so newly issued Treasuries are funkier due to auction/issue dates & business times. The schedule should resume normally next week.

Great question! Vanguard should not be charging any commission fees for any Treasury purchases!

Much love!! ❤️

very good points!

Thanks so much! Love the profile pic!

Great question! The 3 month penalty is already calculated & reflected in your I-Bond balance. For example, if you observe the balance of a recently deposited I-Bond, you'll notice that it "does not earn any interest" for the first 3 months. At the 5 year mark, you may notice a "sudden spike in interest" because the 3 month penalty is lifted, increasing your nominal I-Bond value significantly. The government wants to insure you pay your penalty, so they'll take it automatically instead of waiting for us nice folk to report it on our taxes!

@@EricTangOfficial I see. The government is more steps ahead 😆. Thanks for your reply.

Great question! I've been planning on making a video on the best Treasury Bill ETF's, and I'd agree with you that an ETF like SGOV is very attractive! They're a bit more complicated in that buying/selling can incur capital gains taxes, which disrupts a little bit of the tax treatment. Moreover, a small percentage (3-4%) of the fund is not held in US government obligations, which also a bit more complexity. Overall though, if you're working with a great broker, these are likely automatic calculations done for you. But if a broker is less than adequate, perhaps some things may be slightly off come tax time. Generally speaking, those ETFs are definitely interesting!

Great question! If you purchase through Treasury Direct, a 1099-INT is issued for Treasuries specifically. If you purchase via a broker, there may be capital gains associated if you sell Treasuries before the maturity date, and so other forms may be present as well.

Great question & sorry for the late reply, Gisselle! I've touched on in mostly in the comments for other viewers and don't remember if i have a dedicated video for it. But here's the tl;dr: Interest income received on Treasury Bills is recorded via a Form 1099-INT at the end of the year. This is the form you use when working on your federal taxes. No state tax is owed on Treasuries so they are not reflected in your state taxes.

I haven't found any reputable broker that accepts Treasury Bill purchases via a credit card. If there is one, feel free to let me know!

Great question! Generally, the interest earned from Treasury Bills held to maturity is taxed as "interest income." Capital gains are only applicable if you sell Treasuries before the maturity date.

Excellent point, Keith! The IRA is truly a special account!

Good question & sorry for the late reply, John! Fidelity has a weird system where money in a money market fund may be locked/used to purchase a new Treasury, even before the previous one is fully redeemed and settled into your cash balance. I'm not sure if this is as intended or simply a mistake on their part, but others online have also noted similar issues.

Sounds like a solid plan, Mike! 4-Week Treasury Bills are definitely a great option for knowledgable savers like yourself!

Great question! You'll be issued a 1099-INT by January 31st of the following year in which you redeem the I-Bond.

For I-Bond redemptions, a 1099-INT will be issued by January 31st come tax season. TreasuryDirect does not provide paper savings bonds or paper account statements. If you do want a paper copy of your account information though, you can use the browser's toolbar to print the relevant pages in your account that show your holdings.

Glad it was helpful!

Great question, Jamie! I'll be happy to tackle this in a future video, but here's a short run down to help you get started: 1) Maturity Date: the day the Treasury is redeemed and you are paid back in full. This is the day the lock up period is "completed" and money is deposited back into your bank account. This is generally the 2nd most important factor to consider because you never want to lock up all your funds in case of emergency. 2) Price: the amount you pay (deposit) for a given security. Treasuries are often sold a discount to their par value. For instance, a 3 Year Treasury Note might have a "Price per $100" of 99.25. In this example, I can deposit $99.25 today. In 3 years (the maturity date), I will be paid back $100 in full. 3) Coupons: the fixed cash payments an investor receives for a bond. Treasury Notes & Bonds offer coupons which provide a regular source of income often paid semi-annually or annually. For instance, a $1,000 bond with a 5% coupon will pay $50 in interest every year. This coupon rate does not change throughout the bond's lifetime, so you'll always get paid $50 per year until the bond matures. Notably, Treasury Bills are "zero-coupon bonds," meaning they do not pay any interest; instead, all of the return is done via the price. 4) Yield: the annualized rate of return of a given investment. This combines the "Price" and the "Coupon" to calculate an annualized rate, very similar to the APY you see advertised on savings accounts and CD's. This is generally the most important factor for long-term investors because a 6% yielding asset will provide much more income than a 4% yielding asset. Hope that clears some things up! For most investors, "Yield" and "Maturity Date" are the significant factors to consider. For more niche investors who are focused on receiving income on certain dates to fund their lifestyles, "Coupons" can be an important factor as well.

Great question! Ally CD rates tend to be much better than the national banks, and they often rank among the highest across online banks. They're certainly a great option! Marcus currently offers slightly better rates across the board, (e.g. Marcus 9-month CD pays 5.00% APY compared to Ally's 4.45%), so they might be a nice alternative as well!

Great question and sorry for the late reply! The easiest way is to do so online: 1. On the upper tabs of Merrill Edge, hover over "Research." 2. Select "Mutual Funds" under the subsection titled "Investments & Screeners." 3. On this page, there is another navigation menu directly underneath the main one. This is underneath the "Mutual Funds" and includes various tabs. Select "Cash Management Solutions." Note: you may need to expand the menu if your device is very small. 4. Here, you'll see a lot of various mutual funds offered by companies like Blackrock and Fidelity. To find Bank of America's Preferred Deposit program, you'll have to scroll all the way down to the bottom of the page. 5. There, you'll find the "Preferred Deposit" and "Preferred Deposit for Business Program." Click on "Deposit." 6. Finally, you'll be able to make your initial deposit. Please note the initial deposit must be at least $100,000. Any subsequent transactions can be made with as little as $1,000. Hope that answers your question!

Good question! The math would be: $2,500 x 0.056 to get a rough estimation for the interest earned per year ($140).

Great question! Almost all the data points I've seen exclude property tax or insurances under the 5% utility. There might be one or two out there, but I wouldn't count on it unfortunately

Yes! Covered calls would require 100 shares of the stock. If you don't have the 100 share requirement, it would be considered a "naked call" instead!

Great question! Unfortunately, as of December 2023, Merrill Edge doesn't allow you to purchase fixed income products just yet. Hope they change it in the future!

@@EricTangOfficial thank you