Reaching for Yield
By Dennis Miller, Editor, Money Forever
As the Federal Reserve continues to purchase $85 billion in government debt each month, interest rates remain significantly lower than the inflation rate. This scenario poses challenges for many seniors trying to manage their finances. While the Dow has reached record heights, the question remains: where can investors find meaningful returns?
The Fed may tout signs of a recovering economy, but I remain skeptical. If we were to see the return of 6 percent CDs, many seniors and baby boomers would likely withdraw their investments to minimize risk. Personally, I haven’t encountered anyone enthusiastic about the market; any excitement I see is confined to television and online platforms.
Staying ahead of the narrative portrayed in the media is a daunting, yet essential task for investors looking to succeed. The guidance provided by Federal Reserve members offers key insights that cannot be overlooked.
A recent Bloomberg article featured remarks from Federal Reserve Vice Chairman Janet Yellen, providing valuable insights:
“I view the balance of risks as still calling for a highly accommodative monetary policy to support a stronger recovery and more rapid growth in employment. … While there are some signs that investors are reaching for yield, I do not currently see significant indicators of issues such as rapid credit growth, excessive leverage, or distinct asset bubbles that threaten financial stability. … Ceasing asset purchases before observing a meaningful improvement in the labor market might set expectations that the existing level of accommodation won’t support economic recovery.”
Staying Ahead of Inflation
Yellen’s message is crystal clear: the Fed plans to continue suppressing interest rates, compelling investors to allocate more capital into the market. Although the market has reached unprecedented levels, there are merely “some signs” indicating investors are seeking yield. This situation is unlikely to change anytime soon, so it’s vital to continue investing our savings wisely.
It’s time to discard any optimistic illusions and confront the reality of our financial landscape. The claimed inflation rate of 1.7 percent does not truly reflect the rising costs many of us experience. Whether inflation is truly 5, 6, or 7 percent, our main goal should be to grow our portfolios ahead of inflation to prevent our net worth from eroding each year. We cannot afford for our money to lose value simply due to inflation.
Reliance on Social Security and minimal interest from traditional safe investments is no longer feasible for many. The reality is that an increasing number of people cannot sustain their lifestyle on interest income alone, prompting a reevaluation of retirement expectations.
In essence, we are revisiting the “needs versus wants” lesson we once taught our children, but now it’s time to apply it to ourselves. While cutting back on non-essential expenses is challenging, it can also be liberating.
Additionally, we should refrain from withdrawing money from our investments unless they are yielding returns that keep pace with inflation. Tapping into our principal to cover expenses means we are unintentionally depleting our savings. If this becomes a habit, financial hardship is inevitable.
How to Create a Steady Stream of Monthly Income
One of my ongoing challenges is managing my emotions around investments as I seek higher yields. Occasionally, investing in emerging technology stocks makes sense, but I only commit amounts that I can afford to lose. Fortunately, there are safer investments available that yield decent returns, so it’s essential to leverage expert advice and top-notch research.
A friend of mine considers himself a professional stock picker – a trait we all should adopt. He subscribes to various investment newsletters and selectively invests based on what aligns with his financial goals. Ample information is at our disposal, but we must take an active role in managing our finances. The stakes are too high to leave it to chance.
The Federal Reserve has made our challenges clear: we must identify new sources of yield to generate income. But how can we locate these opportunities, and where should we begin?
To assist with these questions, our team at Casey Research has recently published a report detailing how to establish a reliable stream of monthly income—specifically designed for the challenges we face today. Inside, you’ll find information on how to efficiently set up our strategy, the investments to consider (as well as those to avoid), and their anticipated payout dates for budgeting purposes. Click here to read this concise guide that explains how our approach works.
Sincerely,
Dennis Miller
for Economic Prism
[Editor’s Note: Throughout his career, Dennis Miller has collaborated with numerous Fortune 500 companies, training countless executives on effective communication strategies. His extensive list of multinational clients includes: GE, Mobil, Shell, Schlumberger, HP, IBM, Corning Glass, Eastman Kodak, AC Nielsen, and Johns-Manville. In partnership with Casey Research analysts, Dennis guides subscribers on constructing a resilient retirement portfolio to secure their Money Forever.