Elon Musk is a great investor. He's become the world's richest person by making big bets as an entrepreneur on disruptive technologies, including an initial $6.5 million investment into Tesla in 2003 when it was called AC Propulsion.
Since then, he's invested significant money in SpaceX, a space exploration company, Solar City, the solar energy company eventually acquired by Tesla, and other ventures, such as Starlink.
What's the iconic billionaire doing with his money now?
A No-Brainer Investment Idea
Musk isn't likely looking to make another significant investment right now, given his $44 billion acquisition of Twitter in 2022. He's already rebranded it as "X" and plans to reshape it into a social media and finance Goliath.
Yet, he's still got to invest money daily, and short-term Treasury bills are one investment he thinks makes a lot of sense.
Responding to a tweet from hedge fund billionaire Bill Ackman, Musk suggested there's a lot to like about owning short-term Treasury bills.
Yeah, short term T-bills are a no-brainer
— Elon Musk (@elonmusk) August 3, 2023
Treasury bills are shorter-term debt obligations the federal government issues maturing in less than one year. The short-term nature of T-bills means that yields closely track the Federal Reserve's Federal Funds Rate.
Since March 2022, the Federal Reserve has increased the FFR by 5.25%. As a result, investors parking their money in the 3-month T-bills can earn the equivalent of 5.27% annually.
That's a healthy yield for a relatively safe investment. For perspective, the national average bank savings account only yields 0.53% annually, according to Bankrate. Given that backdrop, it's little wonder Musk called Treasury bills a "no-brainer."
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Elon Musk, Bill Ackman, and many others, including legendary investor Warren Buffett, use T-bills to park cash for yield. With rates as high as they are right now and inflation likely to keep them that way, that's unlikely to change.
Warren Buffett recently said on the financial news network CNBC that he bought $10 billion in short-term Treasuries last Monday and the prior Monday and plans to buy $10 billion more this Monday. He said the only question was whether to buy 3-month or 6-month bills.
Six-month T-bills yield about 5.48%, slightly higher than the 3-month rate to compensate investors for the additional time.
Those shorter-term bills may be a better investment than longer-term Treasuries.
On August 2, Ackman revealed that he's short the 30-year Treasury bond via options, partly because of worry that inflation will remain high and spending will require the government to issue more bonds, depressing bond prices, and increasing yields.
Short-term Treasuries can be bought directly from the government by using a free Treasury Direct account online.
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