Many people are drawn to investing in gold and Treasury bonds because they are considered relatively safe compared to other investment options. Treasury bonds have maintained a good reputation, even during past economic downturns, thanks to a reliable global taxpayer base. This makes them an attractive choice, especially for those nearing retirement and looking for a stable income source.
However, despite the benefits, it’s important to recognize the potential downsides of investing in Treasury bonds. Their suitability depends on your financial needs and situation.
One major drawback is their low yield. Because they are considered safe, Treasury bonds offer minimal returns, even after the recent downgrade of the US credit rating to AA. Experts at Golden Eagle Coin note that during periods of high inflation, the returns might not even keep up with the rising prices. So, while Treasury bonds can provide a steady income if you’ve already saved a substantial amount, they aren’t very effective for building large savings. They are more appropriate for preserving capital and ensuring financial security.
Another potential issue that came up during the recent debt ceiling debate is the possibility of the US defaulting on its debt. While this might not mean losing all your money, it could result in delayed access to your funds due to maturity extensions in case of a debt “default” by wealthy nations.
Despite this, the likelihood of a US default happening soon is very low. The US has increased its borrowing capacity, and if necessary, various government and quasi-government institutions can authorize the printing of money to pay off debts. However, this could lead to inflation, which might erode your savings.
In summary, many investors find the safety offered by Treasury bonds to be worthwhile. But for those looking for high returns, Treasury bonds are not the best option due to their low-interest rates, which is their biggest downside.