Over time, a good’s or service’s price will usually go up in a healthy economy. Known as inflation, the financial phenomenon affects healthy currencies all around the globe. The United States Dollar, for example, is constantly losing value due to inflation. People who hold their money without investing it effectively lose value as time marches on. Investing is the only way to safeguard your assets against inflation.
Some investments have high average return rates, but with greater reward comes greater risk. It doesn’t make sense to most people to risk losing your nest egg for the opportunity to raise your portfolio’s growth rate by a few percentage points.
According to the Federal Reserve Bank of Minneapolis, the rate of inflation of the United States’ consumer price index rose 2.2 percent in 2018, 2.1 percent in 2017, 1.3 percent in 2016, and 0.1 percent in 2015. The long-term average increase in the consumer price index as measured here in the United States is 3.22 percent, calculated from 1913 to 2013.
Bond Mutual Funds
Bond mutual funds work by pooling investors’ money together to purchase vast, highly valuable chunks of bonds. This form of investment is an effective means of diversifying your portfolio’s mix of bonds. You also get a professional investment management guru to oversee the performance of the bond mutual fund you buy in to.
Also, the vast majority of these funds pay investors each month. Talk about a secure stream of income!
Money Market Accounts
This form of investment tucks investors’ hard-earned capital away into securities with redemption dates with very short-term horizons and low risks. The bulk of what money market funds invest in are United States Treasury Bills, certificates of deposit (CDs), and bonds offered by municipalities around the United States.
Money market accounts nullify most years’ inflation rates, though they generally don’t earn much higher returns than that.
Treasury Bills, Notes, And Bonds
The United States Department of the Treasury regularly requests loans from investors. The primary ways that the U.S. Treasury Department garners such investments is through bills, notes, and bonds, each of which has a respectively longer maturation date. You will never lose money from these securities unless the United States government collapses.
Virtually every financial institution across the United States offers customers the opportunity to store their money in savings accounts. Although most banks’ savings accounts interest rates is no greater than 0.1 percent per year, some newer banks offer rates of return of one percent or greater.
Rewards Checking Accounts
Not just anybody can be approved for a rewards checking account. Although providers of such a service require customers to maintain high minimum account balances, make a minimum of debit card transactions, and more. However, the average interest rate for these high-yield checking accounts was 1.65 percent in 2016