You Have Better Investment Options

By:  Clinton Miller, CFP®

You probably already know this: interest rates have increased substantially over the past 12 months.  Anyone buying or selling a house has seen mortgage rates rise faster than we’ve seen in years.

To make matters worse, inflation higher than its’ been in decades.

But you may not know that higher interest rates offer you new opportunities to invest.  For nearly a decade, it was difficult to get a decent return on short-term money without taking too much risk.  Today you probably have better options for your cash than you did even 6 months ago- and with higher inflation, missing out on better returns is costly.

A bank account is slightly better than an old coffee can for storing your moldy cash. Consider some better options for your money:

Money Market Mutual funds offer attractive yields.

When I first started as an advisor almost 10 years ago, these mutual funds seemed…pointless.  Each share is always worth 1$, and the fund manager aimed to keep it there. The funds usually kicked off a yield of 1% or less.

But things have changed: For the first time in my career, investors can reap 3.5-4% or more on short-term money. If you have money on the sidelines and you expect rates to keep rising, Money Market funds may be a good fit.

Bonds aren’t so boring anymore. 

Bonds are supposed to be sort of boring, but last year was a big exception to the historical rule.  In fact, 2022 was the worst year ever in the American bond market. No, that’s not an exaggeration.  Worse, bonds and stocks tanked simultaneously, which almost never happens. It was a terrible year for conservative investors.

Bond yields are inverted right now, which is another way of saying that short term rates are unusually high.  It sometimes indicates a recession is coming. Investors who like certainty and better returns may find individual bonds attractive right now- as long as bonds are held to maturity, investors know exactly what their return should be and exactly how much money they will receive.

Balanced Investment Portfolios

As rates rise and the bond market corrects itself, bonds should start behaving like they normally do.  This would imply Balanced portfolios will provide better returns than they have over the last decade.  The takeaway is this: You can take less risk to get the returns you need.  This is fantastic news if you’re entering retirement or need to tap your investment in a few years.

Any investment presents opportunity, risk, advantages, and disadvantages.  A financial advisor can help you clarify your goals and come up with a plan that fits you. We’d be very pleased to review your investments and make sure you understand your options. If you have questions about your money, contact our office to schedule a Pleasant Financial Conversation.