Archives for August 16, 2017

Tough Times for Conservative Income Investors

JP Morgan Asset Management recently released the Q3 2017 update to their Guide to the Markets, which is another of those resources worth bookmarking for future updates. Some folks put a lot of time and energy into it, and it contains a lot of interesting charts and graphs. Here’s just one that caught my eye.

I consider myself a relatively conservative income-oriented investor, and this chart shows why it’s been a tough several years to be that type of investor. For much of the last 30+ years, you could have put your hard-earned money in an FDIC-insured certificate of deposit and enjoyed a guaranteed return above inflation. This isn’t even when shopping around for the top rates, just taking the average bank CD rates.

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Nowadays, you’re just trying to keep the bleeding to a minimum, jumping at the chance to grab a 3% APY long-term CD that might just keep up with inflation.

This also partially explains why the stock market keeps going up and up. Which would you rather have?

  • FDIC-insured cash savings that gives you $1 in annual interest per $100 invested, or a
  • S&P 500 ETF with a 4% earnings yield and 2% dividend yield? In other words, a basket of companies that for every $100 invested earns $4 a year in profit and out of that gives you $2 a year in cash dividends?

I really can’t complain as my overall portfolio of stocks, bonds, and bank CDs has more than doubled in the past several years. Yet, I also share that vague feeling of uneasiness with many other investors.

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