The Benchmark

U.S. Treasury Bonds (Notes and Bills) are considered the safest investment you can make.

The risk of all other investments as compared to Treasury issues is known as a “benchmark”. When investors are worried about the economy, the stock market or pretty much anything else, they sell other assets and buy Treasury issues –in a so-called “flight to safety.”

While Treasuries are declared the safest investment, that is not the case in every situation.
There are two basic ways that Treasuries (or any bonds for that matter) fit into your portfolio.

--The first way is you buy the bond and hold it to maturity. In the case of Treasuries, this is the safest investment you can make.

--The second way is you buy the bond with the idea of selling it for a profit at a later date.

This is where Treasuries can actually become risky.
The purchase price is determined by several factors including supply and demand and interest rates.
If interest rates rise after you bought the bond, it is unlikely you will be able to sell it for the same amount you paid. In other words, you lose money. The risk, in this case, is not default (for Treasuries) but in market value. If interest rates fall, you might be able to sell for a profit.

The bond itself is still rock solid for security, however its price when traded before maturity is subject to the same influences as stocks. The important point is to not confuse the secure nature of Treasuries held to maturity with the inherent RISK of buying and selling them on the open market, which is why we at Key Financial Group always recommend holding your investments to their respective maturity dates.
Please note that the above-noted U.S. Treasury investments are not offered by Key Financial Group.