The financial market and the economy are now entering a new phase, full of new risks and opportunities for investors. It is evident enough that unemployment levels are declining and there is hope that inflation will start to pick up. As it is with economic transitions, this moment of change is creating new opportunities in the financial markets: the landscape is shifting and investors need to come up with smart ways to invest their money. Where should you invest your money? Here are the four areas you may consider:
Inflation-Protected Bonds (I-Bonds)
Inflation denies you the opportunity to reap from your investment in traditional fixed-income securities. This is because the money you earn through interest is not worth as it was during the initial investment. This phenomenon has prompted some financial institutions to come up with products which shield your investment from inflation. Treasury Inflation-Protected Securities (TIPS) are one way to go about this. TIPS come at fixed interest rates but the principal may fluctuate. You can also purchase I-bonds which are some form of savings bonds whose interest rates fluctuate while the principal remains constant.
As the global economy recovers from the recession, the fear of deflation has been replaced with concerns about possible inflation. For some time now, the price of commodities such as oil, gold, land packages and agricultural products have been on an upsurge. Most businesses have not been able to pass down the high costs down to the consumer but there is a likelihood that all this will change. While some experts rule out the possibility of inflation being a major problem, you should not throw caution to the wind. Inflation cannot be ignored. Real assets such as commodities could provide protection for your investments in an inflationary environment. However, rather than trying to invest in the next ‘hot’ commodity, tap into an extended exchange-traded fund or a mutual fund and invest in a range of different commodities.
The municipal bond market is attracting more investors by the day. Most issuers are able to repay their obligations without any problem and the returns are good; a 10-year bond may yield about 4 % interest. The secret to success is simple: learn to protect yourself from weak issues.
Steve Persky, managing partner of the Dalton Investments was quoted saying, ‘One way to hedge it is with the Australian dollar.’ True enough, the Australian economy was unscathed by the global recession. It did not fall victim to the credit pressure, which faced much of Europe and the USA. So, if you want to invest, you now know where to put your money.
As is evident, there are many places in which you can invest your money. Keep in mind to involve a financial advisor to guide you. Share this content with your friends on Facebook, Twitter, Instagram and other social media platforms.