Who likes taking risks when they can be avoided, especially about investments?
I bet, no one.
So if you are currently searching for how to invest your money without bothering about incurring losses, think treasury bills.
But then what are treasury bills? Not to worry, let us dive in.
What are treasury bills?
In simple terms, treasury bills, also known as T-bills, are a form of security issued by the federal government through Open Market Operation (OMO). Financial institutions (who act as agents) sell the bills at discounts on actual values (par values) which determines the interest accruable to the investor at the end of a specific period.
What this means is that at the expiration of the deal which usually lasts for 91, 182, or 364 days, you get paid your interest plus the amount initially deposited. For instance, a Treasury bill of N100,000 may be sold for N95, 000 such that you stand to earn a total of N100,000 in the end.
Imagine gaining N5,000 which you wouldn’t have had if you left your money lying fallow in a savings account.
Even more – you will not be taxed on your interest earned from Treasury bills; it’s all yours!
Also, note that the maturity period of the Treasury bill you purchase determines your eventual interest. Naturally, a one-year T-bill comes with a higher yield. Simply put, you get a bigger reward for tying up your money somewhere for a while.
Apart from the fact that no risk is involved in buying Treasury bills, they are also very liquid. This means you can sell and convert them into actual cash at a higher interest rate before maturity.
Moreover, based on their flexible nature, T-bills can be used as collateral for other transactions, such as bank loans.
Now let’s see how returns are calculated on Treasury bills.
How to calculate return on investment for Treasury bills
If you buy N400,000 naira worth of treasury bills for 364 days at 12% then your expected return on investment would be N48,000 (i.e. 400,000 X 12%).
At maturity, you will get 448,000. Isn’t that awesome?
Other benefits of investing in Treasury bills
Below are some of the listed benefits of this type of investment:
- Treasury bills are a good source of steady income.
- They are suitable for persons who wish to save and earn more from their savings
- No transaction fee is required to purchase a T-bill
- Treasury bills are perfect for the preservation of capital
- By many standards, they are considered the best investment option for disposable income.
What do you think? Are you wondering where to start? Well, at Zimvest, we already have interesting and affordable options in Treasury bills that will enable you to start investing right away. Talk to us on 0700 020 0220 or email firstname.lastname@example.org now. Let’s help you make more money without breaking a sweat.