Friday, September 19, 2014, PM | Leave Comment
Although the government may reduce its $80 billion dollar bond buying program at some point, the central bank will not stop helping the economy. The most important thing to consider is that the government might keep short-term interest rates very low until next year.
If you do not need money, you should put your cash in the bank. Though, if you don’t have a lot of cash, investing is highly recommended.
There are five income categories that should explode this year.
Method One – High-Yield Corporate Bonds
High-yield corporate bonds were every successful in 2013. Although the category attracted plenty of cash, it is not necessarily a good thing.
However, the percentage gap between the yield on ten-year treasuries and a basic junk bond was big enough to support the costs. Bargain hunters will invest if junk bond prices drop below five percent; if this happens, you should join them.
Method Two – Real Estate Investment Trusts
According to specialists at My Lump Sum and other finance professionals, real estate investment trusts usually refinance or expand their debts by borrowing, which makes them vulnerable to growing rates.
In 2013, property owning REITs had an off year, but they broke even in November. According to independent analyst Brad Thomas, there are 16 prior periods when treasury yields rise, and REITs generate positive returns numerous times.
The sluggish results from 2013 occurred because of profit-taking following many months of super performance. There will be better results this year.
Method Three – Preferred Stocks
Preferred stocks did not perform well last spring and summer. Though, they have improved because buyers are finding yields that are twice as valuable than common stocks.
Investing is recommended because there are now a few preferred stocks that yield seven percent.
Method Four – Municipal Bonds
Although municipal bonds have been a victim to Government practices, tax-exempts are not as sensitive to rate changes.
The problems that occurred in Detroit illogically caused sell offs of bond in numerous localities. This is why you can get a three percent tax-free yield for ten years and a 4.5 percent yield for thirty years from municipalities that are highly rated.
Method Five – Stock Market
Many individuals are paying over four percent in the stock market. The market has had some hiccups because the government wanted to taper with the bond-buying program.
However, this could only happen if the government thinks that the economy is strong enough to handle bigger bond yields.