GBIL: Treasury bills at your fingertips (NYSEARCA:GBIL)

Exchange-traded funds (“ETFs”) are all about convenience. Countless people want to buy Treasuries, and they do, because their yields go directly to the direct Treasury. The problem with this? It’s a bit of a hassle. So why not just get access to the box Does your current broker do this for you?

This is the solution Goldman Sachs Access Treasury 0-1 Year ETF (NYSEARCA:GBIL) brings to the table. To refresh the information, it is worth noting what treasury bills are. These are short-term debt securities issued by the US Federal Government, with maturities ranging from a few days to a maximum of 52 weeks. GBIL seeks to track the performance of the FTSE US Treasury Composite Index for a period of 0-1 year, thus tracking the index which was created to track the performance of Treasury securities that have an initial maturity remaining between… 0 and 12 months. GBIL provides investors with the opportunity to obtain safe, stable, and creditworthy short-term U.S. government debt. Quite simply, investors agree, given that the fund has more than $5 billion in assets.

A look inside the ETF

GBIL has 31 holdings, all of which are US Treasuries and notes with maturities varying from days to one and a half years. The five largest holdings accounted for up to 65 percent of the fund’s assets.

Having different maturities allows for continuous exposure, as the Fund matches short maturities by continually rolling over and reinvesting maturing Treasury bills in those issued during the same time frame. Currently, the majority of the fund falls in the 0-3 month range.

Peer comparison

So what’s the appeal here? fruit. The 30-day SEC yield is currently around 5.16%. This is the part of the bond market that has no risk of default because, frankly, the government has a printer. How does the fund stack up against other funds? One fund worth comparing to is the SPDR Bloomberg 3-12 Month T-Bill ETF (BILS). It is also a low-cost fund that seeks to replicate the Bloomberg 3-12 Month U.S. Treasury Bond Index, providing exposure to U.S. Treasury bills maturing between three and 12 months. It lacks exposure to securities maturing in less than three months. When we look at the price ratio between the two, we see that their performance has been consistent (with one obvious wrong data point, as you can see).

Evaluate the pros and cons

There are many positive benefits to GBIL. The fund focuses on short-term US Treasury bonds, which provide investors with the highest level of capital protection without the possibility of loss, as the full faith and credit of the US government stands behind it. Investments in GBIL have the potential to deliver attractive long-term risk-adjusted returns due to their low-cost exposure to the US bond market, with a net expense ratio of 0.12 percent. The passive management and representative sampling of the fund means that GBIL is also tax efficient and incurs lower transaction costs. These are all factors that can erode investment returns.

What’s the downside? These high rates may not last long, if the Federal Reserve lowers interest rates in the near future. Because these bonds are short-term in nature, they do not have the potential upside that longer-duration Treasury bonds might have in a low interest rate environment.

Conclusion: Strategic income allocation

In conclusion, the Goldman Sachs Access Treasure 0-1 Year ETF provides investors with an attractive opportunity to add a low-risk, income-oriented allocation to their portfolios consisting of a diversified basket of U.S. Treasury securities with very short maturities. GBIL’s characteristics of low risk, high current income and partial principal protection can serve as great diversification for a riskier portfolio to mitigate downside risk and capital loss. It is also considered an effective tool for risk-averse investors or when risk appetite is reduced due to stock market volatility. I think if you want to view the T-Bill in your brokerage account, this is a convenient way to get it.

Expect crashes, corrections and bear markets

Are you tired of being a passive investor and ready to take control of your financial future? Introducing the Lead-Lag Report, an award-winning research tool designed to give you a competitive advantage.

The Lead-Lag Report is your daily resource for identifying risk drivers, uncovering high-return ideas, and getting valuable macro feedback. Stay ahead of the game with important insights into leaders, laggards, and everything in between.

Move from risk-taking to risk-averse with ease and confidence. Subscribe to the Lead Lag Report today.

Click here to access and try the Lead-Lag report free for 14 days.