Warren Buffett has been storing most of Berkshire Hathaway’s cash reserves in the safe haven of U.S. Treasury bills—a move that individual investors should consider copying, reports an article in Barron’s. The T-bills—government securities that mature in less than a year—have yields as high as 3% and could offer a much safer refuge than money-market funds and CDs. And unlike CDs, you do not have to pay state or local taxes on T-bills.
T-bills can be purchased through banks, brokers, or straight from the government’s TreasuryDirect program, and come in maturities of 4 weeks, 8 weeks, and 3, 6, or 12 months. The yield on the 3-month bill is currently 2.5%, while the 6-month and 12-month are 3.05% and 3.2%, respectively. That’s much higher than last year’s yields of just over 0; as the Fed has raised rates, the yield has climbed, too.
Investors can also garner exposure to T-bills through ETFs such as the iShares Short Treasury Bond ETF, which holds an average maturity of 4 months and currently has a yield of 2.1%. For those willing to take on a little bit more risk, the iShares 1-3 Treasury Bond ETF has an average maturity of 2 years and is yielding nearly 3%, the article details.
Berkshire Hathaway has stockpiled $105 billion in cash as of June 30th, and the T-bills offer a much safer place for the risk-averse Buffett to park it than other short-term options such as commercial paper.