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.
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.
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.
For Habit Creation and stacking
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.
Margin Trading, Deep OTM & ITM
Up to 7% interest on your saving account
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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