Investing When Your Time Horizon Is Short – The New York Times

Money market funds currently yield on average over 4%. crane data Leading companies such as Vanguard, Fidelity, Schwab and T. Rowe Price offer such funds. Fed yields surged sharply from near zero last year, following the Fed’s lead, and could rise to near 5% if rates continue to rise, indicating the Fed’s intentions is very high.

Several high yield savings account Unlike high-yielding money market funds, funds with government guarantees currently offer interest rates in excess of 3%, according to Bankrate.com. Bank CD Those with maturities of one year or longer are starting to offer yields in excess of 4%. Two-year government bonds offer yields in excess of 4%. Treasury Inflation, or I-Bondpaying 6.89%.

In short, at the beginning of 2022, short-term holdings were largely unattractive. Right now, there are a wide range of options with relatively good yields, but none are particularly good if inflation is still holding steady. 6.5% annual rateas the latest figures show.

If you can afford to invest over the next few decades, the arguments for both stocks and bonds are compelling.

Over the 25-year period ending December, the S&P 500 delivered an annualized return of 7.64%, including dividends, according to data compiled by Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. . So in 9 or 10 years, the investment will double for him, and again and again, inflation rate in most years.

Bonds haven’t produced returns of that magnitude over the long term, but they’re still very good, with annual returns of over 6% for diversified bond portfolios. Vanguard data.

But those flashy long-term returns include scary years, and 2022 is one of them. If you need to convert your stocks or bonds into cash, you will likely suffer a large loss.

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