Investing in fixed income alternatives

Many who invested in bond mutual funds with long maturities in 2022 were disappointed because total returns were negative.

When interest rates increase, the value of long-term bonds falls. Thus, for investors who thought that bond holdings would protect them, a fall in fund prices was disappointing, because in 2022 both bond prices and stock prices fell dramatically in value.

Some good, conservative options

At the beginning of 2022, investors looking for conservative investments that paid reasonable interest rates did not have very good options. The returns for Treasury bills, short-term CDs and money-market funds were very poor, in most cases less than 1%.

The Savings Game

What will happen in 2023 is hard to predict. If the rate of inflation falls and the Federal Reserve starts to cut interest rates, bond prices will increase and the value of bond funds with long maturities will increase, and equity prices will also rise.

By Elliot Raphaelson

But no one can be sure if inflation will be controlled, and if inflation is not controlled better, then the Federal Reserve will not be taking steps to decrease interest rates.

I Love You Wills

From page 11 select someone you would not have picked). An arrangement that leaves assets outright to the surviving spouse is less protective in such an event.

Fortunately, for conservative investors, there are now much better alternatives for those looking for stable shorter-term conservative investments with reasonable returns.

For example, I had invested in Vanguard’s Federal Money Market Fund (VMFXX), which was returning over 4% at that time. The return on that fund is now over 4.5%. Vanguard requires a $3,000 minimum investment for that fund.

Money-market funds are very liquid, and you can sell shares quickly and convert them to cash whenever you wish.

On the other hand, establishing a trust for the surviving spouse under the management of a trusted nominee you select can help ensure that assets are managed sensibly for their benefit if they are or become unable to