How to Make the Most of Fixed Income in a Low-Interest World
Lower interest rates are great for borrowers, but can be tough on investors. How can you protect your fixed income investments when returns drop?
Introduction
The Federal Reserve just cut interest rates by 0.50% last September 18, 2024. While this helps with mortgages and car loans, it means lower returns for fixed income investments like bonds and CDs. Whether you’re just starting out or have been investing for years, it’s important to know how to adjust your strategy in a low-interest-rate environment.
What Happens to Fixed Income When Rates Fall?
At its core, fixed-income investing is about securing stable returns over time, typically through assets like bonds, treasury securities, or CDs. The problem is that when the Fed cuts rates, yields on these assets also tend to drop. For example, current CD rates hover at 3.9% for a one-year term, U.S. Treasury Notes offer around 4.13%, and bonds yield about 3.37%+. While these returns may seem modest, you don’t have to settle for less.
However, not all fixed-income investments are equally affected. In fact, you can find opportunities that outperform these rates. At American Vision Capital (AVC), our fixed-income solutions offer returns that are higher, sometimes even double what CDs, T-Notes, and bonds are currently offering, giving you a competitive edge despite market fluctuations.
Smart Moves for Fixed-Income Investors
Even in a low-rate world, earning solid returns is still possible through smart diversification. One way to achieve this is by adding corporate or municipal bonds to your portfolio, which often provide higher yields than U.S. Treasuries. With potential rate cuts on the horizon, locking in current rates with longer-term bonds or CDs could be a strategic move. That’s where American Vision Group comes in, our above market fixed interest rates outperform current CDs and T-Notes, giving you an edge in navigating potential FED rate cuts. By diversifying your bond portfolio, you can maintain both stability and income, even as overall yields decline.
What You Can Do Right Now
First, review your portfolio. Are most of your investments in short-term bonds? It might be time to switch to longer-term options that lock in current yields. Also, think about refinancing loans like mortgages or car loans to take advantage of lower rates. Finally, consider moving cash into fixed income accounts, high-yield savings accounts, or locking in CDs before rates drop further.
Conclusion
Low interest rates don’t mean you have to settle for weak returns. By diversifying and making smart moves now, you can still protect your income and investments as rates drop.
Take the Next Step
Want to learn more about smart investment solutions for low-interest environments? Connect with American Vision Group for expert guidance on how to optimize your fixed-income strategy. Check out our website at americanvisiongroup.io to learn more.
