In the wake of the novel coronavirus (COVID-19) and its impact on the global economy, interest rates in the U.S. are currently at their highest levels in years. Central banks around the world have taken measures to reduce the economic pain inflicted by the virus, and it has been specifically encouraging to see savings-based interest rates increase; this provides economic stability and opportunities for investors to benefit and make the best use of their money.
It’s important to understand the importance of hard-earned money and how it can be used to create long-term wealth. With savings rates up, now is a great time to capitalize on the advantages such high rates provide. As such, below are some of the best and safest ways to make the most of your money during the current rate hikes.
Before taking action to maximize the use of your money, here are some important points to consider:
• Understand your risk profile – Savings rates are higher, but not all forms of investments provide the same rate of return. Depending on your risk tolerance, consider techniques and investments that provide a higher rate of return without depleting all of your savings.
• Have a long-term perspective – Recession-friendly investments and safe options tend to offer lower rates of return. However, investments such as ETFs, bonds and other debt instruments, provide you with a higher return on your savings and maintain stability in your portfolio over the long term.
• Talk to experts – Your money is your asset, so it’s important to talk to financial advisors and take their advice into consideration when deciding on an investment.
Now that you are familiar with the basics, here are five ways to capitalize on the current higher savings rates:
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Invest in government bonds – Despite the higher rates, government bonds are still one of the safest ways to invest — with almost zero risk of losing your money. Government bonds also offer one of the highest rates of return compared to other investments, making them a smart choice for anyone seeking the highest returns.
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Put money into high yield savings accounts – High yield savings accounts are great options for people who want to minimize risk. Interest rates are usually lower than those on other investments, but high-yield accounts still offer higher returns than regular savings accounts.
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Build a long-term portfolio – Building a diversified portfolio that consists of stocks, bonds and other debt instruments is a smart approach to investing. Investment diversification helps manage the risks involved and boosts your overall return rate.
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Invest in Certificates of Deposit (CDs) – Known for their guaranteed rate of return (“CD laddering”), CDs are a relatively safe way of investing your money without taking on too much risk. CDs typically have terms of anywhere between three months and five years and can provide a great return over time.
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Explore alternative investments – Many investors today are turning to alternative investments. These include venture capital, crowdfunding, art and real estate investments, among others. Although these investments may not be as safe as some traditional options, they provide the potential for significant returns.
Making the most of your money during the current rate hikes is a great opportunity to create long-term wealth and security. While it’s important to understand your risk profile and have a long-term perspective with your investments, the above options offer a variety of opportunities for capitalizing on the rates currently available. It’s always important to speak with professional financial advisors in order to make the most of your money in the long run.
