T-bill safe investments with high returns

T-bill safe investments

with high returns






Treasury bills meaning and functions

can be interesting to read.


But before the details of the maturity

period of treasury bill and

treasury bill interest rate

are discussed.


Understand the need

for exposure to debt instruments

along with the equities in your

portfolio. It is important to consider

a good composition.


Choose as per

your financial goal and the kind of

risk appetite you have.


Most importantly if you do not have the

expertise in the field,

get a qualified professional to help you

in your financial decisions.

Do not trade or invest in the internet

news, avoid rumors or tips.



T-bills were largely used by financial

institutions to generate steady returns

across a time horizon.


It was not available to retail participants,

or non-institutional buyers. 


However, the Reserve

Bank of India,

RBI, and the National

Stock Exchange

both have come in to

develop the

wonderful opportunity

for retail investors

to invest directly

in the T-bills.



Now, you can easily buy T-bills from your

Demat account.

But, before you put a single penny,

it’s important that you

learn the significance of bonds and

treasury bills and how

to go about it. 


The contents of this article on T-bill

or any other financial instrument should

not be taken as financial advice.


Read on for the sake of knowledge

and please do your own due diligence

before investing.


We will see how to buy

T-bills on Zerodha.


Government treasury bills are auctioned

by the RBI.


They are in the form of bonds and

Treasury Bills. 


So, anyone who is buying this is

essentially loaning a small amount of

money to the Government.


The government uses this money for the

the infrastructure of the country through roads,

bridges, etc. The Government

pays interest and also gives back the

principal at the end of the time period

of the instrument.


When it comes to the Government bonds

or the G-secs there are semi-annual or

annual interest payments as well

as per the tenure and terms. While in

the case of T-bills there are no direct interest

elements, however, you get the benefit

here too. Read through this piece to know more.


You should

be able to find and know more about how I

s interest calculated

on T-bills and how it is calculated or

paid across

time horizons across the

T-bill categories.


So, why are T-bill considered

safe investments? 

The T-bill comes with a Sovereign Guarantee

which basically means that the Bond or T bill

is issued by the Government of

India. It means that these are supposedly

risk-free investments.


Your risk assessment is a key thing to

understanding how you should take upon

the investments that your wealth deserves.

There could be a ton of different ideas for

online making money. 

Take the one that suits your best, but before

anything try educating yourself on the pros

and cons of the product.


The information in most cases is

freely available.

It’s up to you to find out the best utility in all of

them and go with the right one

as per your needs.


How many kinds of T-bills are there?



One can buy T-bills for a fixed period

of days namely, 91 days, 

182 days and 364 days. These can be across

various interest

rates and can be bought based on the investment

horizon.


Government T bills are usually seen every

Wednesday

on the site of Zerodha (check calendar).


One should always check the effective

rates of interest and

then one can choose what time frame best

suits his/her needs. 



Applying for a T-bill safe

investment

option

is almost like

applying for an IPO issue.

But, these are two different assets.



When you apply for the T-bill, you are

basically going to get the allotment only

after non-competitive bidding has

done the price discovery part. If you are

entitled to get the

bill, the same will be credited to your

Demat account in a

span of 3-4 days.


Your broker should be telling you the

timeframe

effectively after applying.


One can check the effective rates of

interest and then can

choose what time frame best suits

his/her needs.  Before

selecting the

T-bills also see the

kind of bills,the duration,

and the interest that

you are supposed to get.


T-bills do not have

an interest component.

So how do you earn?


So, inherently there are two aspects

to the T-bill.

The actual value and the discount value.

When you buy the

T-bill you actually pay the full amount up

front and then get

the difference, you get while selling the

bond. So, upon expiry,

you get the bond redeemed at its

true value only. 


So, imagine you buy something for

10000 INR, but eventually,

your account only holds up to

9500 INR for say 364 days.


At the end of the period,

this is settled to the true value.


What happens at expiry?

How to book interest?


Extinguishment of securities happens as the 

Government debits the T-bill and the par value is 

paid to the account directly. On Zerodha this is

quite automatic and you don’t have to do much

monitoring at all.



So, what happens

when a T-bill matures

is you get the actual

value of T-bill.


Is there a formula for how

the interest is calculated?

Simply put, one should look at

other fixed income 

Instruments like the Fixed Deposit

scheme of the banks 

and then calculate or focus on the

T-bills or the bonds

based on the advice of his/her

financial advisors,

do not base your opinion on much

knowledge of the financial markets.

 

The yield of a T-bill is equal

to the discount

value of the

T-bill divided by the bond price.

This is multiplied by 365

divided by the number of

days to maturity. 


How to buy a T-bill?


Follow the steps in the video to

easily buy a T-bill in Zerodha.


Save it and share



 


Check the RBI calendar for T-bills

and bonds issue dates and

then follow the steps in the video

to make your first investment

in Treasury bills.


Do you know the 

benefits of Margin Trading?

But, what is the

difference between

a T-bill

and Government

bonds or G secs?


T-bills are less than a year while

G-secs have a longer

time period and have a different

set of interest payment

schedules. You usually get the

interest as per the

regulations or terms of the bond

mentioned

on the RBI website of the

particular issue of

the instrument.


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To sum up, you should assess the

importance of

an instrument like T-bills first,

before jumping into

the investment. See, if this really

suits your needs and

if you are okay with the interest

rates.



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Though the rates are high when

compared to some

savings accounts, it is better to

quantify the post-tax

returns as well.

Also, see if equity

is expected to do

better in your portfolio.

And, as always do your own

due diligence.


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