How do Savings Bonds Work as Defensive Investments?
As retail investors diversify outside of an equities-only portfolio, many are looking at savings bonds as an opportunity to capitalize on rising interest rates. Historically, they are one of the oldest and most trusted investment products. They’re backed by the full faith and credit of the United States government, and they offer investors options to both preserve and grow their wealth. They’re widely considered a defensive investment and tend to rise in popularity as the stock market falls on hard times. Let’s take a closer look at savings bonds: what they are, how they work as investment vehicles and how to best leverage them into a defensive portfolio. Plus, we’ll…
Looking Closer at Bonds Inflation Risk
Bonds are generally considered a defensive investment and a safe haven when markets trend down or become volatile. Yet, it’s important to remember that bonds aren’t immune to economic forces. Specifically, inflation can decimate the returns bonds offer through coupon payments. Investors looking at diversifying into bonds need to be aware of bonds’ inflation risk and strategies for offsetting it. Inflation risk can be a tricky concept to understand because it’s impacted by two diverse factors: bond interest rates and current inflation rates. Depending on the bond you hold and the macroeconomic forces affecting inflation, your bond portfolio could face more or less inflation risk than someone else’s. Here’s a…
Looking Closer at Bonds Inflation Risk
Bonds are generally considered a defensive investment and a safe haven when markets trend down or become volatile. Yet, it’s important to remember that bonds aren’t immune to economic forces. Specifically, inflation can decimate the returns bonds offer through coupon payments. Investors looking at diversifying into bonds need to be aware of bonds’ inflation risk and strategies for offsetting it. Inflation risk can be a tricky concept to understand because it’s impacted by two diverse factors: bond interest rates and current inflation rates. Depending on the bond you hold and the macroeconomic forces affecting inflation, your bond portfolio could face more or less inflation risk than someone else’s. Here’s a…
A Closer Look at the Best Performing Bond Funds of 2022
After settling to historic lows, bond yields are coming back up. Rising interest rates are also an opportunity for retirees and passive income investors to begin exploring the best performing bond funds as a way to preserve their wealth. But, like any type of ETF or mutual fund, bond funds require a little bit of investigation before you make an investment. Namely, you want to make sure the fund is structured to meet your expectations. Bond funds offer plenty of stability and the appeal of stable income, but not all bond funds are the same. They vary greatly depending on the type of bonds the fund holds, its objectives and…
A Closer Look at the Best Performing Bond Funds of 2022
After settling to historic lows, bond yields are coming back up. Rising interest rates are also an opportunity for retirees and passive income investors to begin exploring the best performing bond funds as a way to preserve their wealth. But, like any type of ETF or mutual fund, bond funds require a little bit of investigation before you make an investment. Namely, you want to make sure the fund is structured to meet your expectations. Bond funds offer plenty of stability and the appeal of stable income, but not all bond funds are the same. They vary greatly depending on the type of bonds the fund holds, its objectives and…
Series I Bonds Explained
With inflation topping multi-decade records, it’s no wonder investors are looking for answers. Retired folks may be especially concerned. After all, stubborn inflation makes it harder for them to stretch their retirement income. This article will take a closer look at Series I bonds and why you might want to consider them. Often, investors have turned to gold as an investment to fight high inflation. Some professional investors question gold’s merits as an investment. It does not produce income, and people do not use the metal for anything other than jewelry. For instance, most of the world’s gold sits in bank vaults. There has been a correlation between inflation and…
Series I Bonds Explained
With inflation topping multi-decade records, it’s no wonder investors are looking for answers. Retired folks may be especially concerned. After all, stubborn inflation makes it harder for them to stretch their retirement income. This article will take a closer look at Series I bonds and why you might want to consider them. Often, investors have turned to gold as an investment to fight high inflation. Some professional investors question gold’s merits as an investment. It does not produce income, and people do not use the metal for anything other than jewelry. For instance, most of the world’s gold sits in bank vaults. There has been a correlation between inflation and…
Are Fixed-Rate Bonds a Good Investment?
Fixed-rate bonds have been a popular investment tool for centuries. Investors make an investment in a fixed-rate bond by lending money to the issuer for a specified time. At the end of the specified time (maturity), the issuer returns the investor’s money. In the meantime, the issuer pays the investor interest based on a fixed rate. Interest payments are typically semi-annual but can be annual, monthly or even weekly. Different types of entities can issue bonds. These entities are looking to raise capital by borrowing money (principal) from investors. Bond issuers are mostly corporations or governments. A corporation may want to borrow money to run its business or pay for…
Are Fixed-Rate Bonds a Good Investment?
Fixed-rate bonds have been a popular investment tool for centuries. Investors make an investment in a fixed-rate bond by lending money to the issuer for a specified time. At the end of the specified time (maturity), the issuer returns the investor’s money. In the meantime, the issuer pays the investor interest based on a fixed rate. Interest payments are typically semi-annual but can be annual, monthly or even weekly. Different types of entities can issue bonds. These entities are looking to raise capital by borrowing money (principal) from investors. Bond issuers are mostly corporations or governments. A corporation may want to borrow money to run its business or pay for…
Treasury Direct Bonds
What ultra-safe investment is currently paying a high interest rate? The answer is certain Treasury Direct bonds. For instance, inflation-indexed Series I bonds issued from November 2021 to April 2022 are paying 7.12 percent for the first six months. Interest is a combination of a fixed rate and an inflation rate. While the fixed rate is annual, the inflation rate may change every six months. If the inflation rate remains high, so will the yield. Compare that with the extremely low rates offered on other safe investments such as certificates of deposit and savings accounts. For that reason, the sale of Series I bonds is booming. What are Treasury Direct…
