News Reader.info

WHAT I’M TELLING PEOPLE TO DO NOW Just as in March 2020, I have no clue how stocks and bonds will perform going forward. Certainly, the Fed will raise the key short-term fed funds rate,

because they said they would. Yet that is already priced into both stocks and bonds, and the fed funds rate is merely the overnight rate. But, unlike 2020, there is less of a need to

rebalance, since both stocks and bonds are down.  It may be reasonable to make a couple of changes on bonds. If intermediate and long-term interest rates continue to rise, bonds will

continue to decline. Generally speaking, the longer the maturity of the bond, the larger the decline when interest rates rise. But it would also be a mistake to assume those intermediate and

long-term rates will continue to increase. There are two ways to protect from the possibility of rising rates.  First, it really is now possible to earn high rates safely with I bonds. 

These are inflation-protected savings bonds, issued and guaranteed by the U.S. Treasury, and the previous link explains how they work and how to buy them. The current six-month rate for I

bonds bought through October is 9.62 percent! That’s not a typo. The amounts that can be purchased are limited; you can also buy something similar known as Treasury Inflation-Protected

Securities (TIPS), or TIPS Funds. Another option is to buy a short-term Treasury note, which can be purchased through Treasury Direct or your brokerage firm. It’s an unusual time where a

short-term Treasury note yields almost as much as a very long-term Treasury bond. As of May 2, 2022, a two-year Treasury note was yielding 2.74 percent — not much less than a 30-year

yielding 3.07 percent. If interest rates do rise, the long-term bond will get hit far more than the short-term. Not only are Treasury notes yielding more than CDs, but the interest is also

state tax-exempt. I think this is an option for part of a bond portfolio. Still, don’t abandon high-quality bond funds, since it’s quite possible rates will decline in scenarios such as a

recession. Unlike past stock plunges, this correction requires less courage. You don’t necessarily have to sell your bonds to buy more stocks, which I can attest is an unpleasant feeling, to

say the least. And you can safely earn a much greater return on bonds while taking even less risk with I bonds, and a very good, safe return with shorter-term Treasury notes.  Investing is

a (very) long game. I’ve found that people who constantly change their asset allocation targets typically chase past performance and underperform going forward. Sticking to a plan is simple

but also very hard to do. Though I know it’s also a very hard thing to do, try to ignore the depressing news when it comes to investing. Remember, neither good times nor bad times last

forever, and capitalism will survive.  _Allan Roth is a practicing financial planner who has taught finance and behavioral finance at three universities and has written for national

publications including _The Wall Street Journal_. Despite his many credentials (CFP, CPA, MBA), he remains confident that he can still keep investing simple._