As more people look for safe places to invest, interest in how to buy U.S. bonds is growing as well. Especially these days, when economic volatility is high, many investors are considering U.S. Treasury securities as a core asset in their portfolios.

A bond is fundamentally a contract between a debtor and a creditor. Governments or corporations issue bonds to raise the funds they need, and investors buy them to receive principal and interest on a predetermined maturity date. When the U.S. government lacks funds to run the country’s operations, it also issues Treasuries—these are what we call U.S. Treasury bonds.

U.S. Treasury securities are broadly divided into three categories: T-bill, a short-term instrument with a maturity of less than 1 year; T-note, a medium-term instrument with a maturity between 1 and 10 years; and T-Bond, a long-term instrument with a maturity of more than 10 years. Among these, the U.S. 10-year Treasury bond is often cited as an indicator of the overall health of the global economy.

The biggest appeal of bond investing is safety. Because the U.S. government guarantees repayment, they are considered virtually risk-free assets. On top of that, they offer predictable returns, high liquidity, and tax benefits (federal taxes are levied, but state and local taxes are exempt). This is why they are especially popular with retirees and conservative investors.

However, there are also risks that must be considered when investing. When interest rates rise, the value of existing bonds falls, because interest rates and bond prices move in opposite directions. Inflation is also a problem. Since bonds pay a fixed interest rate, if the inflation rate is high, real returns decrease. If you are a foreign investor, you should also pay attention to exchange-rate fluctuations. When the dollar weakens, your returns converted into Korean won may decline.

How to buy U.S. bonds can be chosen according to your investment preferences. The first method is buying directly from the U.S. government through the TreasuryDirect website. There are no fees, and principal protection is solid, but there is a limit of up to $10,000 per person. The second method is using bond funds. Professionals manage them, and you can diversify across various bonds, but management fees apply. The third method is purchasing bond ETFs, which have the advantages of low fees and high liquidity.

For Korean investors, in addition to how to buy U.S. bonds, there are other factors to consider. To manage exchange-rate risk, some positions can be hedged while others are not, allowing you to structure your allocation accordingly. When the U.S. dollar strengthens, the unhedged portion can deliver significantly higher returns, while when it weakens, the hedged portion helps protect against losses.

Holding both Korean government bonds and U.S. government bonds can provide portfolio diversification benefits. Because the business cycles of the two countries do not always match, when one side is weak, the other can help offset it. In addition, holding both won and dollar-denominated assets allows you to naturally hedge against exchange-rate fluctuation risk.

One important concept in bond investing is duration. It is an indicator that shows how much a bond’s price changes in response to interest-rate changes, and the longer the bond’s maturity, the more sensitive it is to interest-rate movements. If your goal is principal protection, you should choose bonds with a longer duration. If you want to reduce volatility, you should choose bonds with a shorter duration.

Taxes are also an important consideration. Interest on U.S. Treasury bonds is subject to U.S. federal taxes, but you can avoid double taxation thanks to the double taxation agreement between Korea and the U.S. It is advisable to consult a tax professional before investing.

To summarize how to buy U.S. bonds, you should choose the appropriate method based on your asset size, risk tolerance, and time horizon. Whether you buy directly or through funds or ETFs, the key is to build a strategy that matches your goals. If you want stable returns, U.S. Treasury securities can still be an excellent option.