Are you one of the many investors currently holding onto cash that is earning a 5% yield? If so, it’s time to consider making a move before those attractive yields start to dwindle. At Extreme Investor Network, we understand the importance of maximizing your returns and protecting your income in a changing market environment.
According to Federal Reserve Chairman Jerome Powell, there is a possibility of a rate cut in September if inflation data continues to cool. This means that short-term instruments like money market funds and high-yield savings accounts could see their income drop as rates decrease. But don’t worry, there are strategic moves you can make to protect your income and even benefit from potential rate cuts.
One option for investors looking to transition out of cash is to move towards longer-dated bonds to lock in higher yields and potentially benefit from price appreciation as rates come down. As bond yields and prices move inversely, longer-term strategies may be favorable in the current market environment.
Core bond funds are a solid option for investors wanting to collect solid yields while diversifying their portfolio. These funds typically include a mix of Treasuries, mortgage-backed securities, and corporate bonds, providing stability during market volatility. Vanguard’s Core Bond Fund (VCORX) and Fidelity Intermediate Bond Fund (FTHRX) are great options with competitive yields and manageable expense ratios.
For those looking to add more yield to their core bond investments, consider exploring the “core-plus” category. These funds offer slightly higher yields with exposure to riskier segments of the bond market, including high yield bonds. Vanguard’s Core-Plus Bond Fund (VCPIX) is a good example of a fund that offers increased yield potential with careful management of risk.
Another avenue for investors to consider is municipal bonds, especially for those in high income tax brackets. Municipal bonds offer tax-exempt income, making them a valuable asset for high income investors. BlackRock’s Short Maturity Municipal Bond ETF (MEAR) and High Yield Muni Income Bond ETF (HYMU) are two ETFs that can help create a barbell strategy for investors seeking a combination of duration and yield.
At Extreme Investor Network, we believe in providing our readers with valuable insights and actionable strategies to help them navigate the ever-changing investment landscape. Consider these options as you reposition your portfolio and make the most of your investment opportunities.