Why its a bad idea to invest in Treasury money market funds

#1

Post by arnavsahu336 » Thu, Jan 11, 2024, 9:28 PM UTC

I have been using an YC-backed app called Finvest to buy US Treasury Bills directly (I am also helping the founder), instead of buying money-market funds.

Interest rates will drop soon. Treasury money market funds only invest in short-term securities and hence, their interest rates will drop as the Fed cuts rates.

With Treasury Bills, your rate is locked in if you hold to maturity. So if you buy a 1-year T-Bill, your rate is locked in no matter what happens.

What are the others doing to hedge against a future environment where rates drop?

Re: Why its a bad idea to invest in Treasury money market funds

#2

Post by AnimalMuppet » Thu, Jan 11, 2024, 9:31 PM UTC

> So if you buy a 1-year T-Bill, your rate is locked in no matter what happens.

For a year.

If that satisfies you, then good. If not... longer maturities?

Re: Why its a bad idea to invest in Treasury money market funds

#3

Post by arnavsahu336 » Thu, Jan 11, 2024, 9:37 PM UTC

AnimalMuppet wrote: post #2

> So if you buy a 1-year T-Bill, your rate is locked in no matter what happens. For a year. If that satisfies you, then good. If not... longer maturities?

Longer-term notes are very attractive now too. I buy 1 year T-Bills because I don't want be too illiquid beyond a year.