Interest rates are high now (relative to recent investing environments) which means that you can get decent returns with little-to-no risk through bonds, CD’s, and fixed indexed annuities.
While research suggests that stocks perform better than bonds a majority of the time, especially if held long-term, it can be a good option to invest in bonds in addition to stocks for lower-risk options.
We are seeing a very high interest rate environment now, including:
We can help place you into all of these. A good bond investment strategy includes creating what’s called a “bond ladder” which consists of buying different lengths of maturities. For example, a one-year bond, a 2-year bond, a 3-year bond, etc.
Contact me for a free consultation if you have cash sitting in your bank account or if you want to dial back the risk in your investments.
In addition to investing in bonds, CD’s, and annuities, you can also practice interest-rate arbitrage to take advantage of the current interest rate environment. Arbitrage is simply buying an asset for lower and selling it for higher. This can also be effectively done in your personal finances by paying off your higher-interest debt faster than paying off your lower-interest debt.
For example, paying off a 2-5% interest rate mortgage by simply paying the minimum payments and holding on to that debt as long as possible, while making extra payments on your higher-interest debt such as 20% credit cards or 6-10% personal, student, or car loans. This interest-rate arbitrage is a good money management practice and can save you $10,000’s or more over the course of your investing life. Another form of arbitrage would be geo-arbitrage where you earn your income online or from a high cost-of-living area, but then live in a lower cost-of-living area. This is often practiced by people who work in New York City, but live in New Jersey for instance or who work online as digital nomads and live at the beach in South America or travel around the world.
For help setting up a bond ladder investment portfolio, dialing back the risk in your investments, or for a free consultation to answer any of your financial questions, reach out to us at Upward Financial Planning.
When Daniel is not giving financial advice or managing investments, he enjoys renovating properties, real estate investing, drinking coffee, hanging out with friends, spending weekend trips in his camper van, and exploring the outdoors on a hiking or biking trail in his hometown of Roanoke, VA and beyond.