BIL is an ETF that allows investors to gain exposure to U.S. Treasury Bills.
Contents
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- What Is An ETF?
- What Is The BIL ETF?
- Why Don’t Investors Buy U.S. Treasury Bills Directly?
- What Is The NAV Price?
- What Is The Performance Of BIL?
- Is BIL A New ETF? Why Didn’t I Hear Of It Before?
- Why Doesn’t The Chart Go Straight Up?
- Can You Get Dividends On Etfs?
- What Is The Morningstar Rating On The BIL Fund?
- Are There Options On BIL?
- Conclusion
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What Is An ETF?
ETF stands for Exchange-Traded Fund.
It is a type of investment fund that is traded on stock exchanges, similar to individual stocks.
It typically holds assets such as stocks, commodities, or bonds and aims to track the performance of a specific index.
What Is The BIL ETF?
BIL is the SPDR Bloomberg 1-3 Month T-Bill Exchange-Traded Fund.
Its underlying assets are publicly issued U.S. Treasury Bills with a maturity date of one to three months.
Why Don’t Investors Buy U.S. Treasury Bills Directly?
They can and many do.
However, some investors may be unfamiliar with buying U.S. Treasury Bills from the U.S. Department of the Treasury’s website, TreasuryDirect.gov.
Even if some banks allow investors to buy T-Bills online via their brokerage platforms, it is a bit more complicated than buying stock.
The investor must select maturity dates, and many options have a minimum investment requirement, which may be out of reach for some investors.
Buying T-Bills is conceptually slightly different than buying stock.
T-bills are bought at a discount, meaning the investor pays less than the face value of the bill.
At maturity, the investor gets the full face value.
The difference between the purchase price and the face value represents the investor’s return.
Investors who want exposure to T-Bills with the simplicity of buying shares of stock can buy the BIL ETF.
They can trade in and out of it as often as they like (just like stock) without worrying about maturity dates.
They buy the BIL share at a certain NAV price, and if that price goes up, they profit.
What Is The NAV Price?
NAV stands for Net Asset Value.
It refers to the per-share value of an exchange-traded fund.
What Is The Performance Of BIL?
The BIL ETF aims to provide investment results that match the price and yield performance of the Bloomberg 1-3 Month U.S. Treasury Bill Index – less fees and expenses.
The BIL fund’s performance is often close to its benchmark because U.S. Treasury Bills are considered a safe and relatively stable investment asset.
In the era of 2023 and 2024, this equates to more or less a 5% annual return.
Is BIL A New ETF? Why Didn’t I Hear Of It Before?
No, BIL is not new.
The fund’s inception was in 2007.
Popularity in the fund increased in 2023 and 2024 when the interest rate reached 5%.
Why Doesn’t The Chart Go Straight Up?
When you type “BIL” into your charting software, you might likely see something like this…
While the chart shows price drops and the value of the ETF may seem to remain the same through the years, the investor is making money.
The investor is receiving dividends. The chart only shows the NAV price of the BIL ETF.
Every time a dividend is paid out, the price of the NAV drops because money is taken out of the fund to pay the investors.
You can see that on February 1, 2024, a $0.406 dividend was paid out.
From the previous close of $91.78 to the open of $91.42, there is a drop of $0.36.
More or less, the amount of NAV drop is about the same as the dividend payout.
If you were to plot the investor’s P&L graph, including the dividends received, then you would get the straight diagonal upward-sloping line that you would expect.
Can You Get Dividends On Etfs?
You can. It depends on the ETF. The BIL ETF pays a dividend.
What Is The Morningstar Rating On The BIL Fund?
Two stars out of a 5-star rating, where 5 is the highest.
This rating is as of February 29, 2024, on MorningStar.com.
That is because the returns may not be as stellar as some 5-star funds. But since BIL holds only U.S. Treasury Bills, it is one of the safest ETFs you can find – meaning at least you will not lose money from it.
Are There Options On BIL?
Yes, there are. But you are not going to get the dividends.
And the options have really poor liquidity – one star out of four based on TastyTrade’s liquidity measure.
Conclusion?
If investors ever wanted to invest in U.S. Treasury Bills but didn’t know how they now have an easy alternative via the BIL ETF.
We hope you enjoyed this article on the treasury bill ETF.
If you have any questions, please send an email or leave a comment below.
Trade safe!
Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.
