There were many seniors that invested nearly all of their hard earned savings in savings bank accounts and CDs and money market accounts and were content with the interest spread they were enjoying on their deposits. That was up to 2008 when the scenario changed dramatically. The federal government faced with a recession hit economy lowered the cost of borrowings.
The purpose was to allow loans to become cheaper so that more loans would be availed, industries and service providers would get a breather and money would flow back into the economy and stimulate economic growth and create new jobs. It also wiped the bottom out of bank savings schemes effectively shaving off the value of long term savings of millions of seniors. This experience has necessitated a thorough overview of one’s finances:
Get out of low interest brackets, improve yields and avoid excessive fee structures
When banks are sweeping away your meager savings it may be the moment to consider shifting accounts to credit unions that offer better interest prospects and do not levy a multitude of fees like the banks do all the time. Many unions charge lower ATM fees and also offer varied and low cost internet banking access and amenities. Often it is sufficient if you know an existing member to gain admission to a credit union. If you are a member of an IRA or 401k enquire whether you have option to access a stable stocks fund that offers exposure to a mix of stocks of moderate risk and higher yields than CDs and money market funds.
Avoid bonds that promise higher returns but subject you to greater risk of company default
People love to dive into corporate bonds and junk bonds that promise higher returns but the tradeoff is a higher risk level that may be untenable. If equity stocks are the engine driving your investments, then bonds can be considered as wheels that add stability. It is unreasonable to anticipate that bonds can be used to create higher returns when that is not their USP. In the short term the high risk junk bond prices and interest rates rise and fall in inverse proportion contributing to a more volatile scenario, but such fluctuations may even out over a longer period. Your strategy ought to be to retain bonds that are short term and of good quality companies.
Use growth stocks to boost income and help you outrace inflation
If bonds can be leveraged to make your portfolio stable, stocks can drive growth if they are properly used. For more aggressive growth and healthier returns nothing beats the growth stocks as opposed to the value stocks of financially stable established companies that have straddled the market for years. Stock of pharmaceuticals, IT and biotechnology may be worth investing in even if they bear very high risks. The only solution is to limit exposure to such stocks to 7% to 10% of your portfolio at any time.
This 10% investment could become your vital defense against corrosive inflationary trends that eat into the money value of your investments over a longer term. Such a strategy will allow you to combat inflation that is currently nudging 4% and enhance the value of money that you are investing in long term funds like 401k that will make your retirement more comfortable.
Don’t allow emergency expenses to stand in the way of regular savings and investments
If you use car equity loans wisely you can save yourself the necessity of dipping into savings accounts and emergency funds to survive a crisis that is either natural or man-made. The loan for vehicle title, as the name clearly indicates, is based on the simple collateral of your car title. The auto equity loan can be applied at short notice and doesn’t require a mountain of formalities to release an aggregate loan of 60% of your car’s resale value. These auto collateral loans do not levy interest beyond 25% APR, and loan repayments can be conveniently paid in amortized installments if repayment is spread over a longer term.