Hey venture capital investors, are you looking to get rich quick on mobile apps? Are you thinking about backing the latest mobile app that teaches you a foreign language while you cook the corresponding cuisine? How about a mobile app that makes mobile apps? Want to throw $1 million behind an app that lets you know where Cool Ranch Doritos wrappers are at all times, even if the wrappers are in trash cans?!
If you’ve got an itching impulse to invest that cool million right away…don’t. Instead, take a minute and buy a cash management bill.
A cash management bill is a short-term security that matures between several days and three months. They're sold by the U.S. Treasury Department to cover short-term cash needs and reserve funding while the government waits for tax revenue to come in.
They’re sold in $1 million increments.
That’s huge for you, fearless VC investor. Because if you own one of these, you’ll have just enough time to rethink the terrible investment that would have been an app designed to tell color blind people what color signs are on the road…but you have to look at your phone to read the color while operating the car. See? There are some bad ideas out there.
Related or Semi-related Video
Finance: What are T-Notes, T-Bonds and T...17 Views
Finance allah shmoop what are t notes t bills and
tips All right we'll see that tea in there Well
it stands for treasury and all of these air one
flavor or another of government debt that is the u
s government raises cash for itself teo fix roads build
bridges and erect statues of lebron james dunking on the
statue of liberty or you know whatever else he thinks
the public wants or needs it does that by auctioning
off these debt securities with the promise of its full
faith and credit to pay back the money is the
paper specifies well t notes are quote mid range unquote
paper in that they generally have maturity ease of two
three five seven and ten years that's a teen note
t notes carry a stated interest rate and look a
lot like a normal corporate bond paying interest twice a
year T bills on the other hand are generally very
short term paper usually coming due within a few days
all the way up to a year they're sold or
auctioned at a discount meaning that the t bill might
promise to pay a thousand bucks if it comes due
In six weeks you might pay nine hundred ninety six
dollars for it and you get a whopping fee Four
bucks an interest for your six weeks hard work of
owning that t bill and just you know sitting there
kind of looks like a zero coupon bond Okay so
now we have tips that's tips treasury inflation protected securities
tips as in show us your tips getting Why do
we have such a thing Well the problem with super
duper safe bonds like those of the u s government
is that investors holding them a long time often do
worse after taxes than inflation meaning that if inflation is
growing at three percent a year in their bonds are
only returning one percent a year after tax while then
the investors actually losing two percent a year in buying
power and that's a problem in nineteen nineties when investors
started to realize this issue well they began Tio you
know stop buying u s government bonds and that's a
huge problem for a country that desperately needs to borrow
cash all the time So rather than risk a liquid
marketplace where there's just no buyers buying government paper uncle
Sam created tips which basically adjust the end value of
the principle that investors get based on the c p
i or consumer price index which is a measure of
the average selling prices of a carton of milk a
gallon of fuel a dozen eggs and a grand slam
breakfast at denny's Basically what happens is that the price
of the principal the investor gets back goes up with
inflation over time So they're not losing buying power and
that's a big deal That's it go Enjoy your grand 00:02:33.995 --> [endTime] slam It'll be fourteen thousand dollars in fifty years
Up Next
What is a Money Market Fund/Commercial Paper? Money Market Funds are mutual funds that are very safe and liquid. They invest in cash and securities...
What are government bonds? Uncle Sam needs dough. He sells bonds in the form of T-Bills, T-Notes, Treasury paper of all flavors. His credo? The cre...
What are Treasury Bills? Like other debt finance platforms, the US government issues its debt in several ways, and has different terms for each. Tr...