Government securities

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We have CDs worth about $100,000 maturing over the next six months. We are considering US government bonds, thinking we would gain some tax advantages. We are over 65 and want only income -- no speculation. What kind of government paper should we buy and how do we go about it? C. B.

Attempting to avoid speculation, even for US Treasury bills, notes, or bonds is practically impossible, as any negotiable note or bond will vary in price as interest rates change. US Treasury notes or bonds avoid the risk of loss that could occur with some other security if the organization goes broke. But, US Treasury investments avoid only state taxes -- not federal income taxes.

With E-bonds you can defer current taxes on interest, but you gain no income for current spending. Buying discounted US Treasury notes or bonds could be a good buy for now, but I would encourage you to keep track of prices and be prepared to sell them within 1 1/2 to 2 years. Except for new issues that are available directly through Federal Reserve banks and branches, you should contact a stockbroker to buy notes or bonds on the secondary market -- that is, notes or bonds previously issued.

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Notes and bonds are identical except for their maturity. Notes run from plus one to 10 years, and bonds run from plus 10 years and on. For income with minimum risk, you might consider buying high-quality utility stocks or bonds. Your stockbroker can help you with these. In any event, I strongly suggest a diversification of your assets -- some in US Treasury issues, some in income stocks and some in six-month money-market CDs or one of the money-market mutual funds.

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