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A worldwide pandemic instigated the beginning of a new economic climate after four decades of falling inflation and interest rates. Now, making smarter financial decisions includes following several revised rules for success.READ THE ARTICLE
Some of those listed here include:
📌 Carrying debt is less foolish – in some cases: This does not include credit card debt and the soaring interest rates that come along with it, but when it comes to a fixed-rate mortgage prior to 2022, debt is shrinking according to inflation-adjusted terms.
📌 Asset location matters again: As stated here, “with bond yields climbing along with inflation, it’s time once again to keep your bonds – except for municipals, of course – in a retirement account, so you don’t have to pay income taxes each year on the interest you earn.”
📌 Extending bond maturities is more appealing: As soon as the Fed determines inflation is under control, or on the other hand, a recession is our biggest threat, short-term interest rates will be cut. This will cause today’s cash yields to be cut as well, so to lock in current yields, you may want to consider trading cash for intermediate-term bonds.
📌 Bonds again offer the chance to beat inflation: 10-year Inflation-indexed Treasury bonds are paying 1.4 percent above inflation, while Series I savings bonds are paying 0.4 percent more than inflation.
📌 Future profits are less valuable: Putting money at risk in today’s economy has lost its appeal, especially if it's uncertain whether an investment will pay off decades down the road. Instead, you can now enjoy a five-plus percent yield on numerous high-quality bonds.
Silver lining strategies: You may feel inflation is nothing but negative, but there can be real wins with the right mindset and planning.