Here’s why Treasury STRIPS might be right for you:
- STRIPS, Separate Trading of Registered Interest and Principal of Securities, are zero coupon bonds.
- Their popularity is due to them being backed up by the U.S. government, making them a safe investment.
- They’re fixed-income securities that don’t pay interest and are sold at a big discount to face value.
- Let’s say you $850 for a STRIP and it matures at $1,000 in three years, the $150 is your gain.
- Even though you don’t get interest each year like U.S. treasuries, you still pay accredited interest.
- The solution? Hold STRIPS in your IRA or 401(k) where the growth is tax deferred.
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