Any decent safe investment return ideas?

[Gorm50]

With CD, Treasury rates in the **bleep**ter and equities way too overpriced (FOMO, TINA and Fed bubble blowing) any decent return ideas, experience.  Was using FR annuities but even they have fallen. 

Best 2 year yield I find is 1.75%, 3 year at 2.15%.   

[Tonster521 · Accepted solution]

@Gorm50 

If you are looking for safety and a reasonable return, take a look at I - Bonds. These are the inflation adjusted version of the old savings bonds called EE Bonds. They are currently paying 1.68% for 6 months for I - Bonds purchased through April 2020. After May 3, 2020 (because May 1, 2020 is a Saturday), they will pay 3.54% for six months for I- Bonds purchased from May 3, 2020 through October 2020. The interest changes every 6 months based on non-seasonally adjusted U.S. inflation. You may have noticed that inflation has been increasing as indicated by the cost of gasoline which is a contributing factor. You will not get rich with I- Bonds, but will at least earn the rate of inflation. So, in theory, your money does not lose purchasing power. I - Bonds are not traded so cannot lose your money. They cannot be redeemed before 1 year. If redeem between 1 year and 5 years, you loose only 3 months of interest. In my opinion, the only negative is you are limited to $10,000 per year/per person. There is a provision that you may buy up to $5,000 additional from a FIT refund. Some folks overpay FIT just to obtain an additional $5,000 per year. Hopefully, I added the Treasury Direct website https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm#comb

[AstapblenderA22409]

I've personally dabbled in some FR annuities myself, but I hear you on how even those have fallen lately.

Have you considered crude oil investing ? While it can be a bit of a rollercoaster ride, there's potential for solid returns if you're willing to do your research and stay on top of the market. Of course, it's important to remember that any investment comes with risk, so be sure to do your due diligence before diving in.

[Tonster521]

@AstapblenderA22409 I agree with your last two sentences. As you probably know, there are differences in saving vs. investing and investing vs. speculating. Some folks consider saving (i.e., bank accounts, CDs, etc.) as investments even if they have no chance of earning a return equal to or greater than inflation. On the flip side, some consider investments (such as mutual funds, ETFs, individual stocks, etc.)  as savings (i.e., saving for retirement,etc,) even though such investment may lose value. Another poster suggested AT&T and/or Verizon for their dividends. However, both have decreased in value about 30% since that posting. The original poster on this thread asked for "decent safe investment returns" which limits what one may do to keep their money "safe". Because crude oil is a commodity and I would consider buying commodities as a speculative approach, I suggest looking at Master Limited Partnerships (MLPs) as opposed to speculating on crude oil prices if one wants to participate in the energy sector for potential above average returns even though MLPs are not completely safe.. Although MLPs have been in the cross hairs the last couple of years, their distributions have been more consistent than speculating on price changes. Also, pipelines are safer than truck and rail as we know. There is investment risk with MLPs which folks need to consider. However, for folks that can evaluate such risks, there is an above average opportunity for gain with diversification. But for most folks, keeping it simply with Treasuries (including I - Bonds and perhaps TIPS) as well as CDs will be the safest approach.

[larryk678000]

Often overlooked are preferred shares. Brokers/financial planners don't recommend them because they earn more by selling you a mutual fund. I recommend individual preferred shares.  As an example, Bank of America, Wells Fargo and other banks, averaging near 5%.  I don't know if aarp allows links to articles but this one is a good primer https://retirementincome.net/supplemental-retirement-income/preferred-stocks-2/

[WanjirusBits]

I doubt I'd give any advice to anybody because I don't follow what people my age are advised to do. I don't touch bonds, CDs, and the like. I put half in real estate, one quarter in index funds, and another quarter in single stocks. Just in case, I keep cash to last me at least two years. As far as investing goes, I don't bother my mind as to who is in the White House.

[NOTHAPPENING · Accepted solution]

You can always invest (SOME) of your money in a relatively safe utility like ATT or Verizon.  They cost (respectively) $30 and roughly $60 and pay a handsome 6.8% and 4.3% and what's even better, you get the dividend rate for income taxes!

[Gorm50]

Thank you!  This would be a great prospect on the next correction, ie snag a decent dividend AFTER the principal hit.  

[NOTHAPPENING]

These stocks don't change too much but vary by a few dollars giving a greater or lesser dividend yield.  I think it's a good idea to diversify so don't ever put all your money in one location  - better than banks paltry interest rate.

[Gorm50]

All good points. Believe me I spread it around. Was thinking inflation a threat but just read report showing our 4 major banks have enjoyed a surge in deposits but suffered NO loan growth, suggesting all the Fed's liquidity since 2008 has ended up in the banks' liabilities, not out spurring growth.  That tells me our Fed knows their plan is NOT working to spur economic growth, and we are more likely to face deflation UNLESS loan demand picks up.  

[NOTHAPPENING]

I think the inflation will really hit home when the Climate Change/Infrastructure bill ever gets passed.  Then to pay for it, we have more taxes coming or at least an inflation that we never bargained for.  Start those presses ($$$$) running 24/7 to pay for all this "stuff".

[Gorm50]

You may be correct BUT it amazes as to how many have predicted since 2008 hyperinflation awaited us because all central banks have been papering the world with plentiful and cheap liquidity. NOW, Biden, via fiscal, wants to pepper us with fiscal trillions.  STILL, no one can get above 2%. While the markets are flooded with liquidity seems like equities and RE have been the principal beneficiaries. Velocity is flat, meaning dollars are not turning.  When I read that our top 4 financials have since 2008 amassed $10T increase in deposits over outstanding loans, tells me the CB intent is NOT being realized. Having more gas does NOT make an engine perform better until employed!!

Time will tell. God knows capital markets are all screwed up, given FOMO and TINA.  

[NOTHAPPENING]

Having more gas does NOT make an engine perform better until employed!!

I agree but have no control over the benefits of not working.  Some can make more money staying home than working and I see that as a theme.

[Tonster521 · Accepted solution]

@Gorm50 

If you are looking for safety and a reasonable return, take a look at I - Bonds. These are the inflation adjusted version of the old savings bonds called EE Bonds. They are currently paying 1.68% for 6 months for I - Bonds purchased through April 2020. After May 3, 2020 (because May 1, 2020 is a Saturday), they will pay 3.54% for six months for I- Bonds purchased from May 3, 2020 through October 2020. The interest changes every 6 months based on non-seasonally adjusted U.S. inflation. You may have noticed that inflation has been increasing as indicated by the cost of gasoline which is a contributing factor. You will not get rich with I- Bonds, but will at least earn the rate of inflation. So, in theory, your money does not lose purchasing power. I - Bonds are not traded so cannot lose your money. They cannot be redeemed before 1 year. If redeem between 1 year and 5 years, you loose only 3 months of interest. In my opinion, the only negative is you are limited to $10,000 per year/per person. There is a provision that you may buy up to $5,000 additional from a FIT refund. Some folks overpay FIT just to obtain an additional $5,000 per year. Hopefully, I added the Treasury Direct website https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm#comb

[janetw128]

Cashed out a CD that was @1% when I heard about I Bonds. Will be investing the max of $10,000 and the rest in a CD at a higher rate. I initially heard about I Bonds from Clark Howard. 

[Tonster521]

@janetw128 If you are buying the I-Bond during the period May 2022 through October 2022, you will earn 9.62% for 6 months. It does not matter which month you buy. As an alternative, you may spread you purchases (laddering) over the 6 month period. Make sure you do not buy more than $10,000 in 2022. If you are married, your spouse may buy another $10,000. So, a married couple may buy $20,000. Another strategy to consider for any monies currently in excess of $10,000 (or $20,000 if married) is to buy short term Treasury Bills for your 1 year or less money as opposed to CDs. T-Bills are paying more than equivalent CDs and may be bought with maturities as short as 4 weeks. Because the interest is paid by the Treasury, you do not pay State income tax (if you live in a State that taxes income). I am including a link to Treasury Directhttps://www.treasurydirect.gov/ which will provide you all the details. At the website, go to the Individual section and scroll to the bottom were it states "more". Click on "more" and you will find all the details for buying T- Bills which, again, is for "less than one year" money. You can stay fairly liquid and earn approximately 1% by laddering 91 day (3 month), 181 day (6 month) and 52 week (1 year) T- Bills. You should do better than most equivalent CDs. Also, this approach is commission free and fee free. Good Luck!   

[GailL1]

@janetw128 

. . . . initially heard about I Bonds from Clark Howard. 

Yea, ain't he a gem.  👍

[KidBoy2]

I like Utilities and there yields along with stocks that are in the consumer staples and tech stocks and tech funds. 

I like to invest and have done so for over 50 years. 

[Gorm50]

Exploring the potential, assuming inflation were to take off without destroying the USD, I find I can move IRA dollars to either I bonds or TIPS without limit but need a custodian to hold bonds in paper form.  Can find NO broker nor bank willing to fulfill that role. Understand I can petition IRS with my OWN candidate but the account must be titled in THEIR name, FBO me, using their TIN.  Anyone ever do this with Trad IRAs?  How tough it is to either find a custodian or CREATE one?

[Tonster521]

@Gorm50 

I believe I-Bonds are not available in an IRA. The interest is tax deferred until the I-Bond is redeemed. The maximum holding period is 30 years. You can hold I-Bonds in a Trust (Irrevocable or Revocable). Depending on the language and type of Trust, you may have comparable protection similar to an IRA. Check with an attorney regarding protecting the assets from creditors. In the other hand, TIPS can be held in an IRA. It makes sense to hold TIPS in a tax deferred account such as an IRA to avoid reporting annual "phantom" income tax. Please note TIPS are currently getting bid up by the Big Money Players. Yesterday the Treasury auctioned 5 year TIPS that were bid up to $109 and a fraction. That means a $1,000 TIP was bought/trading at about $1,090 which is a 9% premium. That is expensive. In my opinion, the I-Bond is the better strategy. 

[Gorm50]

Thank you, Tonster!

You are correct about I Bond being unavailable to IRA. Can't tell you the number of FALSE Google info sources, ie NO $10k cap on IRA purchases, find or create an IRA custodian, etc.  Just goes to prove the internet is not always a reliable source!.  

Got call from Treasury and they confirmed NO I Bond IRAs, NO paper, all electronic.  

Had thought, for diversification,  I would lay off some IRA $$$ in I bonds just in case Biden and Powell $$$ printing ignite inflation.

[Tonster521]

@Gorm50 

I am not sure if any additional Biden Bucks will create some inflation. So far, the two Trump stimulus programs and Biden's first stimulus program has not increased inflation. It appears that Businesses and Consumers are not spending the stimulus money. Obviously, there are some folks that need the money for food, shelter, healthcare, etc. However, the majority have saved the stimulus money as evidenced by your posting a few days ago wherein Bank deposits have increased significantly. Our economy needs that money to move (i.e., velocity of money) as you indicated. If the Consumers do not spend money, then Businesses should borrow that money and create products or invest in Plant and Equipment. Neither Businesses and/or Consumers are spending. In fact, both are saving. This is a major contributing factor why our economy has not inflated. One would think that the Biden Administration would have been on top of these Economics 101 Course concepts. However, what did the BA do? Throw more money to Businesses and Consumers to save. And, the BA is planning to send more money to Businesses and Consumers. You may remember that prior to the November Election, Pelosi and Shumer were proposing to Trump to increase the second Stimulus to some unbelievable amount in the area of $3.5 Trillion. As I recall, Trump was in favor of some larger amount with $2,000 going to eligible Americans. Thank God the Senate put the brakes on and the  second Stimulus was under $1 Trillion with only $600 going to eligible Americans. In all honesty, I believe millions of Americans did not need $600. I believe the issue to be aware of is deflation. That will be devastating similar to the Japan experience. As a secondary protection for short duration money, the I -Bond does not deflate like a TIP. So, you will always get your principal returned. The only loss is three months of interest if you redeem between 1 year and 5 years. After 5 years, there is no loss. You will not get rich, but you will not lose. One strategy to implement is create a ladder, perhaps 5 year, so you have annual liquidity at no interest loss. However, there is nothing wrong with getting out longer in time. If you pass before using any of the money, you designate a beneficiary. You can own jointly as well. Good Luck, 

[Gorm50]

After the great recession I certainly believed with all the injected liquidity we'd see some inflation, but there are only two varieties, ie cost push and demand pull and neither was or is here today.  CBs HATE deflation. Maybe that is why Powell and Yellen have NO problem with all this fiscal debt, but, as you point out it does not seem to be working.  Problem is so little of it is invested.  It is JUST SPENT, WASTED on pet programs like they need to do it all before Nov 2022. Still, we have all the long running unresolved, ie entitlement restructuring, education, healthcare that beg attention.  FACT was ONLY the US economy was doing well before CV19.  Have to wonder how some of these really hurting EUs will fare "IF" we come out of this soon.  Sure doesn't look like it.    

Figure when this market corrects I'd buy some dividend stocks, but want to lay some IRA dollars off in metals or something secure as a hedge against the wheels coming off our wagon.  I am not accustomed to fiscal and monetary being so seemingly irresponsible.

This is certainly different than anything I've experienced.  I am more into preserving my capital than growing it, as even as conservative as I am outstandings just continue to increase.  

[Gorm50]

Amen! Must admit NOTHING is normal today. We are printing money like never before.  I certainly question the viability of the USD. Am just exploring options to further diversify $$$.  

[Gorm50]

NBC Today said NOT this year but Todd expects BOTH DC and Puerto Rico to be States by end of the decade.  I find NO ONE believing Supreme Court increase likely. 

Already Secure Act did a job on my plan to distribute IRA $$$.  

[Underbat]

Hello everyone. Please keep the thread on topic, which is

"Any decent safe investment return ideas?"

Thank you for your cooperation in making the AARP Community a safe and welcoming place for all.
http://community.aarp.org/t5/custom/page/page-id/Guidelines

[DeahWA]

In no way am I a financial advisor or even a check book balancer. But I do follow a company with the unfortunate name of Motley Fool for stock tips, some of which I've taken, many of which I've ignored. They do have a way higher than average success rate of picking stocks that have done well during the pandemic year, and I've done okay with their recommendations and principle of holding stocks at least 5 years. Might be worth checking them out.

[sktn77a]

I would steer well clear of individual equities if you are looking for safety, especially now.  The chickens will have to come home to roost soon!

[nctarheel]

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@sktn77a wrote:

I would steer well clear of individual equities if you are looking for safety, especially now.  The chickens will have to come home to roost soon!

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I strongly disagree.

Almost every sector stands to skyrocket as we beat the pandemic.

From retail, to travel, to consumer goods, to infrastructure, to almost everything except the so called "stay at home" stocks, like Zoom, we will see a demand not seen since right after World War II.

Now, of course, this prediction is predicated on beating the pandemic.

The "hesitant" part of the population, ironically, seems to be the same part of the population that holds the majority of individual equities in their portfolio.