Understanding Treasury Bills: How This Colorado Fund Fine-Tuned Its Cash Holdings

Treasury bills represent one of the most straightforward instruments for investors seeking short-term income with minimal risk. To understand how treasury bills work, it’s important to recognize that they are essentially short-term loans to the U.S. government, typically maturing within three months or less. Investors purchase these securities at a discount to their face value and receive the full amount at maturity—the difference between purchase price and redemption value represents the investor’s earnings. Recently, a Colorado-based financial advisory firm demonstrated this approach in action by adjusting its holdings in short-term Treasury securities.

How Treasury Bills Work in Investment Portfolios

Treasury bills operate on a straightforward principle that makes them attractive to conservative investors. When you purchase a treasury bill, you’re essentially lending money to the federal government for a fixed, ultra-short period. The U.S. Department of the Treasury conducts regular auctions where investors bid on bills with maturities of 4, 8, 13, 26, and 52 weeks. Bills are sold at discount pricing—meaning you pay less than the $10,000 face value, and when the bill matures, you receive the full $10,000. The yield you earn depends on the difference between your purchase price and the redemption amount.

This mechanism differs fundamentally from other cash alternatives. Unlike money market accounts that fluctuate based on Fed policy changes, or commercial paper that carries corporate credit risk, treasury bills are backed by the full faith and credit of the U.S. government, making them effectively risk-free from a credit perspective. The current 30-day SEC yield on ultra-short Treasury funds sits around 3.56%, providing meaningful returns while preserving capital.

A Real-World Case: Vanguard Treasury Bill ETF Holdings Adjustment

On January 29, Jim Saulnier & Associates, a Colorado-based financial planning firm, disclosed a significant adjustment to its cash position through an SEC filing. The firm sold 77,109 shares of the Vanguard 0-3 Month Treasury Bill ETF (NASDAQ: VBIL), representing an estimated $5.82 million transaction based on quarterly average pricing. This move reflects a deliberate recalibration rather than an exit from short-term government securities.

As of December 31, the fund’s remaining VBIL stake was valued at $10.70 million, comprising 5.55% of its $192.93 million in total reportable assets under management. This position ranked outside the firm’s top five holdings, with the portfolio now anchored primarily by:

• AOR allocation fund: $25.49 million (13.2% of AUM)
• AOA balanced fund: $17.19 million (8.9% of AUM)
• VBIL Treasury bill position: $10.70 million (5.6% of AUM)
• VEA international equity fund: $7.31 million (3.8% of AUM)
• BIL short-term Treasury fund: $3.92 million (2.0% of AUM)

The VBIL shares were priced at $75.62 as of late January, with minimal volatility recorded over the preceding year—a testament to the stability that treasury bills provide in diversified portfolios.

Why Treasury Bills Remain a Liquidity Cornerstone

The Vanguard fund tracking ultra-short Treasury bills offers investors a practical vehicle for deploying capital into government securities without managing individual bill purchases. The fund charges a minimal 0.06% expense ratio and employs an index-tracking strategy that mirrors a broad selection of bills with maturities of three months or less. This approach provides institutional and retail investors alike with instant diversification across multiple government debt instruments.

The strategic rationale behind maintaining meaningful Treasury holdings becomes clearer when considering current market conditions. With recent 30-day SEC yields hovering near 3.56%, short-term government securities deliver respectable income without exposing investors to equity market volatility or credit risk. The fund’s disciplined approach—using a sampling methodology rather than holding every Treasury bill in its benchmark index—ensures liquidity while minimizing transaction costs.

Importantly, Jim Saulnier & Associates’ decision to trim rather than eliminate its Treasury position signals a nuanced view of cash management. The firm reduced its VBIL allocation by approximately $5.86 million (accounting for both the share sale and market valuation changes), yet continued to maintain a meaningful short-term government securities allocation. This reflects recognition that idle capital carries opportunity costs, but that strategic liquidity remains essential for portfolio resilience.

What Short-Term Treasury Holdings Mean for Your Investment Strategy

For investors contemplating how treasury bills work within a broader financial plan, the Colorado firm’s experience offers valuable lessons. Treasury bills excel at the margin—they don’t maximize returns, but they preserve purchasing power while generating yield superior to traditional savings accounts. An investor deploying $100,000 into a Treasury bill fund at current yields would earn approximately $3,560 annually before taxes, equivalent to what might take years in a standard savings account.

The portfolio structure evident in the SEC filing demonstrates diversification in action. While core holdings in balanced and growth-oriented funds provide long-term appreciation potential, Treasury bill positions create a buffer against market disruptions and provide dry powder for opportunistic rebalancing. Even after the reduction, cash-equivalent holdings account for over 5% of total assets—a meaningful reserve in any allocation strategy.

The broader insight is that treasury bills shouldn’t be viewed as a permanent parking lot for capital, nor should they be abandoned entirely in pursuit of higher returns. Instead, they represent a tactical tool for managing portfolio risk and maintaining flexibility. The 0.06% expense ratio on funds tracking Treasury bills makes them among the cheapest instruments available, with credit risk essentially eliminated and liquidity comparable to stocks and bonds.

Understanding how treasury bills work reveals them as essential infrastructure in conservative investing strategies. They provide the stability that allows investors to pursue higher returns elsewhere in their portfolios with greater confidence, knowing that a meaningful portion of their assets generates steady income with virtually no default risk.