Fixed Income Investing

Regardless of the trend of recent decades toward greater sophistication in retirement savings, the certificate of deposit, or CD, is still king. The obvious advantage of the CD over traditional savings accounts is that they typically yield significantly higher interest; with the primary drawback being the commitment that one incurs to maintain the deposit for a specified period, usually from six months to five years.

This blog article below was written back in 2018 when my bond ladder was working great. It still is. It was true that a CD or bond ladder purchased back then would have been an excellent investment because interest rates have gone down substantially raising the value of existing CDs and Bonds.

As a bond and CD ladder investor you are still benefiting from those previous purchases that are still in your inventory, but now what do you do with new funds from expiring bonds or CDs? That is the big question.

Do you buy a fixed income investment paying almost nothing but you feel is safe, or do you buy stocks which are at a all time high? No easy choices. They call in TINA, there is no other alternative for investors other than stocks. The problem is if stocks are going up because of that and not earnings, then will they collapse at some point in time. Stocks are more risky than bonds as far as return of capital.

Lately bond investors have been buying the perceived less risky type of stocks, like Utilities (XLU) and Real Estate (IYR), because they pay a good dividend and to a lessor degree some commodities (DBC) as a hedge against inflation.

At this point in time there is no easy safe answer of where to put your money. The markets are so distorted fundamental analysis no longer works. -Robert Fowler

The Certificate of Deposit (CD) is Still King (2018)

Retirement Savings – Safety

With interest rates now rising, it may be the time to invest in a certificate of deposit ladder or US Treasury Bills.

In saving money, safety has always had an opportunity cost; that is, lower rates of return than for instruments incurring greater risk. In retirement, we don’t want to loose our savings, that is for sure.  So, how can we offer ourselves the greatest opportunity while we are obsessed more with the return OF our money than the return ON it? Continue reading “Fixed Income Investing”

Originally posted 2020-09-06 10:05:37.