Tags: volatility | inflation | retirement savings | bond ladders | cds | gold

Peter Reagan: Lower-Risk Investments to Ride Out Rough Markets

Peter Reagan: Lower-Risk Investments to Ride Out Rough Markets
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Peter Reagan By Friday, 30 September 2022 12:33 PM EDT Current | Bio | Archive

One thing is certain, U.S. markets are in chaos recently.

On top of that, inflation is still running hot and Americans are feeling pain at the grocery store and the gas station across the nation. Food prices have risen 11.4% over last year, and despite President Biden’s efforts, gas prices are still up 25.6% year-over-year.

Couple this inflationary trend with stocks that have lost at least $7 trillion in value so far this year – and that leaves Americans saving for retirement desperate for relief.

Right now, many are looking for the best investments that could provide a high return on investment, so they can preserve their savings and, hopefully, ride out the storm without watching their retirement savings evaporate. (Of course, all investments carry some risk – the real question is, does the possible reward adequately compensate savers for the risk incurred?)

Let’s examine some possibilities…

These conservative investments could help counter market chaos

U.S. News recently analyzed a handful of a handful of “high return yet low-risk investments” for those seeking refuge from market volatility. Their assessment of the people most interested in these sorts of investments strikes me as absolutely correct:

This is especially true for retirees, who rely on consistent, perpetual withdrawals from their portfolios for income. In this case, prematurely running out of money is the worst-case scenario to avoid. Therefore, ensuring that portfolio volatility remains minimal and reducing the severity of crashes is key. This must be balanced against the need to ensure that long-term returns outpace inflation.

Here are a few of the specific “high return yet low risk investments” evaluated:

  1. Bond ladders: “A way to immunize your portfolio from interest rate risk is bond laddering. This involves buying multiple bonds of different maturities. As each bond matures, investors can redeem it for its face value, thus avoiding having to sell it early at a loss if rates are trending high.”

    Note that this doesn’t, in fact, “immunize” your savings from interest rate risks – rather, it limits the possible losses when interest rates rise. As Investopedia explains, changes in interest rates disproportionately affect longer-duration bonds. Therefore, a mix of durations doesn’t plunge as dramatically as, say, 30-year bonds when interest rates go up.

  1. Certificates of deposit (CDs): "Thanks to rising interest rates, CDs are paying competitive yields above regular savings or money market accounts in 2022, with some topping 2.7%. They are as risk-free as it gets, with your investment insured by the Federal Deposit Insurance Corp."

    As Wolf Richter points out, most of these CDs aren’t available “over the counter” to existing bank customers. Retail investors like you and I can buy these “brokered CDs” through many online stock brokerages (including Charles Schwab, TD Ameritrade, Fidelity and Vanguard).

  1. Low-volatility stocks: “Historically, low-volatility stocks have outperformed the market, especially large-cap ones with excellent fundamentals. Therefore, retirees could lower the risk of their stock allocation by focusing on blue-chip, dividend-paying, low-volatility stocks without reducing their expected returns markedly.”

    Volatility in stocks is measured by a metric called beta, which compares the movement of an individual stock’s price to the overall market during a period of time (five years is standard). The market has a beta of 1, so a stock with a beta of 2 tends to move twice as much as the overall market, up or down. Now, that’s a good feeling when the market is falling – but it can be rather disappointing during the good times…

These recommendations from U.S. News can provide some food for thought, that’s for sure. But this handful of options doesn’t cover all of the potential inflation resistant investments you could consider during challenging times like these.

One trusted safe-haven investment you won’t hear about from mainstream media

Gold has probably always been the safe-haven investment of choice during times of high financial volatility, political instability and general uncertainty. People tend to trust gold because it’s really simple compared to the vast majority of investments you’ll see. You don’t need a prospectus. You don’t need to download a decade’s 10K filings or scrutinize balance sheets – you don’t even need to guess where interest rates are headed in the future. When people buy and hold real, physical gold for the long term, they do so because they don’t want to have to worry about their investment anymore.

Maybe you’ve considered gold. Maybe you’re wondering, Is it safe to invest in gold now?

Here’s what James West has to say on this:

When looking for a safe place to store value, you want something that will retain its value in the face of any imaginable calamity. Short of a meteor destroying life on earth as we know it, gold does not need a market to retain its value. There are no historically verifiable reasons for gold to deteriorate in value.

That’s a bold statement!

On the other hand, there’s a reason the world’s central banks own tens of thousands of tons of gold bullion. There’s a reason hobby metal detectorists regularly discover hoards of gold and silver coins cached hundreds or even thousands of years ago as a concerned family’s emergency fund.

There’s a reason we still use the phrase “gold standard” to describe a paragon, the absolute best example of something. Why? Because gold has been a safe haven for centuries.

If you’re exhausted by the volatility in the financial markets, right now is probably a good time to take a quick look at your overall retirement plan. Could it use a little more certainty, a little more stability? Consider whether diversifying with real physical gold to create your own safe haven against market chaos is the right move for you. Here at Birch Gold, we’ve helped tens of thousands of everyday Americans sleep soundly through financial crises and stock market meltdowns. Why not join them?
Peter Reagan is a financial market strategist at Birch Gold Group. As the Precious Metal IRA Specialists, Birch Gold helps Americans protect their retirement savings with physical gold and silver. Based in the Los Angeles area, the company has been in business since 2003. It has an A+ Rating with the BBB and hundreds of satisfied customer reviews.

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Frustrated with financial market volatility, tired of seeing their purchasing power evaporate, Americans are increasingly searching for stable, lower-risk investments. Today we assess some conservative, safe haven investment options.
volatility, inflation, retirement savings, bond ladders, cds, gold
Friday, 30 September 2022 12:33 PM
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