Remember yield? That's when you could safely squirrel some money away in a savings account or CD, and be paid interest while it was sitting there?
That seems like so long ago. But guess what? It's back! Here's a chart of the 2-year US Treasury Note. What was a measly .5% a year ago is now well north of 4%. Yield is back.
There are many ways to benefit from this, depending on your age and circumstances. Here are some that are easily done:
1. Check into "Brokered CDs." As the phrase implies, these are CDs that you can buy through your broker, like Vanguard or Fidelity. They're FDIC guaranteed, just like at your bank, but pay a lot more than your bank.
The best current rates for 1-3 year CDs at Chase and Wells Fargo are like 2-3%. At Vanguard and Fidelity, they are more like 4.5%-4.7%.
Be forewarned! Some banks are offering "structured CDs" or "market-linked CDs" that purport to offer higher returns with less risk. Language like that is a signal that expensive traps are likely.
Contact us if you have questions, need more details or guidance on how to make the best use of CDs.
2. Some short and intermediate-term bond mutual funds and ETFs are being clocked at nearly 5%. Tax-exempt California muni bond funds are delivering yields of nearly 3.5%.
Contact us if you have questions, need more details or guidance on how to use bond mutual funds.
3. Nearly everyone's portfolio has a mix of stocks and bonds. That's why they're called "balanced" portfolios. They have suffered over the past year because both the stock and bond components have been impacted by inflation, rising rates, recession fears, and all the other things your social media feeds and favorite news programs tell you.
But here's the thing: This is exactly the time to double-down on the 5-10 year timeframe. Every bear market, without exception, has been the base from which an advance to new all-time highs has sprung. And every time, people are surprised.
Contact us if you have questions, need more details or guidance on how to position your portfolio for the future rather than today's noise.
James
Cosgrove, CFP, Plano, TX jim.cosgrove@verizon.net 972-489-0262
Jim Cosgrove, Partner, San Jose, CA jimcos42@gmail.com 408-674-6315 Twitter@JimCos542
