How to Choose Treasury Investments

No matter your age or investing goals, it's a good idea to have at least a small percentage of your portfolio in bonds. Bonds provide a steady, guaranteed source of income and tend to thrive in the financial environments that cause stocks to tumble, making them the perfect counterbalance to heavy stock investments. And Treasury securities – the bonds issued by the US federal government – are the safest of high-quality bonds and make a great linchpin of your bond portfolio.

All versions of Treasury securities share certain traits. They're backed by the full faith of the US government, so their default risk is seen as almost nonexistent. Because there's so little risk involved in these securities, their payment rates are typically low compared to corporate or municipal bonds. You can buy them from Treasury Direct, the official Treasury Department website for managing Treasury bonds; many brokers also allow you to buy and sell Treasury securities within your brokerage account. However, brokers often require a minimum $1,000 purchase for Treasury securities, whereas on the Treasury Direct website, you can buy most securities in $100 increments. The interest paid on Treasury securities is exempt from state and local taxes, but is subject to federal tax.

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Source: Fool.com