So, what exactly are these funds? And why are investors — from beginners to pros — using them as a place to “park cash”? Let’s break it down.

What Are BIL and SGOV?

BIL and SGOV are ETFs (Exchange-Traded Funds) that invest in short-term U.S. Treasury bills. That means they hold government IOUs that are due to be paid back in just a few weeks or months.

• BIL holds Treasury bills that mature in about 1 to 3 months.
• SGOV holds Treasury bills that mature in 0 to 3 months, so it’s even more short-term.

Because these are backed by the U.S. government, they’re considered extremely low-risk — a smart place to keep cash safe while earning a return.

Why Investors Love These Funds

1. They’re Super Safe

BIL and SGOV invest in U.S. government debt, which is about as low-risk as it gets. There’s virtually no chance of default, so your money is well protected.

2. They Pay Good Interest Right Now

Thanks to higher interest rates, these funds are currently paying around 5% or more in annual yield — far better than the 0.01% you might get from a regular savings account.

3. You Can Get Your Money Out Anytime

These ETFs are liquid, meaning you can buy or sell them whenever the stock market is open. Unlike CDs or bonds that lock up your money, BIL and SGOV give you full flexibility.

4. They Adjust Quickly to Rate Changes

Because the bonds inside mature quickly, the funds respond fast to rising interest rates. That makes them safer than long-term bonds, which can lose value when rates go up.

5. They’re Great for Holding Cash

Many people use these funds as a temporary place to store cash. Whether you’re saving for a purchase, waiting for the right investment, or just want to avoid inflation eating away at your savings, BIL and SGOV are smart, stable choices.

BIL vs SGOV: What’s the Difference?

They’re both excellent options. SGOV is slightly shorter in duration, so it may respond just a little faster to interest rate changes, but the difference is small for most investors.

How to Buy BIL and SGOV

You can buy BIL and SGOV just like you’d buy any stock or ETF. All you need is a regular brokerage account — no special bond account required.

Here’s how:

1. Open a brokerage account if you don’t already have one. Popular brokers include:
   • Fidelity
   • Schwab
   • Vanguard
   • Robinhood
   • TD Ameritrade
   • Interactive Brokers
2. Search by ticker:
   • Type “BIL” to find the iShares Short Treasury Bond ETF.
   • Type “SGOV” to find the iShares 0–3 Month Treasury Bond ETF.
3. Buy shares the same way you’d buy a stock. The price is usually around $100 per share.
4. Start earning. Dividends will be paid monthly to your account in cash (or reinvested, depending on your broker settings).

When Do You Get Paid? Ex-Date and Pay Date Explained

BIL and SGOV pay interest as monthly dividends, but there are two important dates to understand:

Ex-Dividend Date

You need to own the ETF before this date to get the upcoming dividend. If you buy on or after the ex-date, you’ll miss that month’s payment.

Pay Date

This is the day the dividend is actually deposited into your account — usually a few days after the ex-date.

Example:
If the ex-dividend date is June 3 and the pay date is June 7:

• Buy on June 1 or earlier → you get the dividend.
• Buy on June 3 or later → you miss the dividend and wait for next month.

These dates are announced each month by the ETF issuer and shown on most brokerage platforms.

A Note on Taxes for Non-U.S. Investors

If you live outside the U.S., be aware that the monthly dividends from BIL and SGOV may be subject to a 30% withholding tax by the IRS. This tax is taken off the top before you receive the money, which can lower your actual yield.

However, many countries have tax treaties with the U.S. that reduce this rate — often to 15% or even less. To get the lower rate, you’ll need to file a W-8BEN form with your broker. If you don’t file, you’ll automatically be charged the full 30%.

It’s a good idea to check your country’s treaty status and talk to a tax advisor if you’re investing from abroad.

Final Thoughts

BIL and SGOV may not be exciting, but they’re incredibly useful. They offer a safe, flexible way to earn solid interest on your cash, especially when you’re not quite ready to jump into stocks or other investments.

With yields about 5%, monthly payouts, and near-zero risk, these funds are ideal for anyone looking to make their cash work harder — without giving up control.

Disclaimer: This post is for informational purposes only and does not constitute financial advice. Always do your own research or consult with a financial advisor before investing.

In this guide, we’ll explain how brokers, market makers, and exchanges work together, how PFOF operates, and how your market or limit order plays a role.

The Role of Brokers:

Brokers like Schwab and IBKR are the intermediaries between you and the stock market. When you place an order to buy or sell shares, your broker sends the order for execution to get you the best price.

In the past, brokers charged commissions for each trade. For example, when I started investing decades ago, TDAmeritrade’s commission was $25 per trade. But today, most brokers have eliminated commissions, and they now earn revenue from PFOF instead of charging you directly.

What is a Market Maker?

Market makers are financial firms that provide liquidity by constantly being ready to buy or sell stocks. They quote both buy (bid) and sell (ask) prices, and their profit comes from the small difference between these prices—called the bid-ask spread.

Market makers use the spread to their advantage. If you place a market order (to buy or sell immediately), the market maker may buy the stock from someone else at a lower price and sell it to you at a higher price, pocketing the difference. Similarly, for limit orders, they may buy the stock below your target price and sell it to you at the price you’ve set.

How Payment for Order Flow (PFOF) Works?

When you place an order with your broker, it doesn’t always go directly to a stock exchange like the NYSE or Nasdaq. Instead, the broker often routes the order to a market maker first. In exchange for this order flow, the market maker pays the broker a small fee—this is PFOF.

For example, if you buy 100 shares of stock, your broker might route the order to a market maker, who pays them a small amount (fractions of a penny per share). Once the market maker executes the trade, it’s sent to the exchange to finalize the transaction.

The Role of Exchange Fees:

While brokers and market makers earn through PFOF and spreads, stock exchanges (like NYSE and Nasdaq) charge exchange fees for executing the trades. Although you’re not paying a commission to the broker, investors still pay fractions of a penny in exchange fees, which the broker collects and passes on to the exchange.

How Your Orders Work (Market vs. Limit Orders)?

Market Orders A market order tells the broker to buy or sell immediately at the current price. When you place a market order, the broker sends it to a market maker, who fills the order at the best available price. The market maker may buy the stock at a lower price and sell it to you at a slightly higher price, keeping the difference (the spread) as profit. They then pay your broker a PFOF fee for routing the order to them.

Limit Orders A limit order allows you to specify the price you’re willing to pay for a stock (if buying) or the minimum you’ll accept (if selling). For instance, if you place a limit order to buy at $50, the market maker might buy the stock at $49.90 and sell it to you at $50, profiting from the $0.10 spread. Even with limit orders, the market maker pays your broker a PFOF fee for handling the order.

How Brokers Make Money Without Commissions?

PFOF allows brokers to make money from market makers, while investors still cover exchange fees (fractions of a penny per trade) when the order is executed at the exchange. Market makers profit from the spread by buying low and selling at the price you’ve set, and they share a small part of that profit with your broker. This system lets brokers offer you commission-free trading, while market makers and exchanges still earn their share.

Conclusion

Even though brokers like Schwab and IBKR don’t charge commissions, they still make money through PFOF. By routing your orders to market makers, brokers earn small fees, while the market makers profit from buying low and selling at the price you’re willing to pay. While you’re not paying a direct commission, there are still exchange fees involved in each trade. Ultimately, your order is finalized at an exchange like NYSE or Nasdaq, ensuring that all parties—including brokers, market makers, and exchanges—benefit from the transaction, even when it’s commission-free for you.

The stock market is a cornerstone of modern investing, yet its mechanics can seem opaque to newcomers. In this chapter, we’ll break down what the stock market is, how it operates, and what investors need to know to participate confidently.

What Is the Stock Market?

The stock market is a marketplace where shares of publicly traded companies are bought and sold. It serves as a platform for companies to raise capital by issuing shares and for investors to own a piece of these companies. The value of these shares fluctuates based on various factors, including company performance, market conditions, and investor sentiment.

There are two primary components to the stock market:

Primary Market: This is where companies issue new shares through Initial Public Offerings (IPOs) to raise capital.

Secondary Market: This is where previously issued shares are traded among investors. Major stock exchanges like the New York Stock Exchange (NYSE) and NASDAQ facilitate this trading.

How Does the Stock Market Work?

Stock exchanges act as intermediaries, matching buyers and sellers of shares. When you place an order to buy or sell a stock through a brokerage, the order is executed on an exchange. Here’s a simplified process of how it works:

Company Listing: A company goes public and lists its shares on a stock exchange.

Investor Orders: Investors place buy or sell orders through a brokerage firm.

Order Matching: The exchange matches buyers with sellers and executes the trade.

Ownership Transfer: Once the trade is completed, the ownership of the shares transfers from the seller to the buyer.

Do You Need a Brokerage Firm?

Yes, investors need a brokerage firm to participate in the stock market. A brokerage serves as the intermediary between you and the stock exchange, enabling you to buy and sell shares. Modern brokerages offer online platforms with tools for research, analysis, and portfolio management.

As of this writing, Interactive Brokers is the only reliable broker available for residents of Cambodia.  There are many choices to choose from for US residents.

When choosing a brokerage, consider factors like fees, ease of use, and customer support. Additionally, ensure the brokerage is a member of the Securities Investor Protection Corporation (SIPC).

What Is SIPC Insurance?

The SIPC provides limited protection for investors in the event a brokerage firm fails. If a member brokerage goes bankrupt, the SIPC ensures that investors can recover up to $500,000 in assets, including up to $250,000 in cash. Note that this insurance does not cover investment losses due to market declines; it only applies if the brokerage mishandles or loses your assets.

Why Understanding the Stock Market Matters

Knowing how the stock market operates is essential for making informed decisions. By understanding its mechanics, you can:

Avoid common misconceptions.

Recognize the risks and opportunities.

Build confidence in managing your investments.

With this foundational knowledge, you’re ready to explore the principles of investing, which will help you create a strategy tailored to your financial goals.