Over the past year and a half, the return potential of the capital markets has dramatically shifted. At the start of 2022, interest rates were essentially zero. At that time, investors could not make any meaningful interest-based returns in bank savings accounts, US government bonds, municipal bonds, or money market funds. To make any meaningful form of prospective return, normally risk-averse investors were “forced” into higher risk alternatives, whether that be in the form of dividend yielding stocks, growth stocks, or high yield bonds.

Moreover, with inflation raging, a zero percent return was causing the erosion of the value of your money due to inflation. Risk averse investors were holding instruments that were losing ground to inflation! In this scenario from early 2022, it was TINA (There Is No Alternative) with respect to taking risks to make returns.

Fast forward to today and things are VERY different and MUCH IMPROVED for those risk-averse among us. With the Fed raising its targeted short-term interest rate from nearly zero in early 2022 to 5.25% today, there are many good alternatives for risk averse investors. Moreover, with inflation now receding to about 3.1%, the real returns (returns after subtracting inflation) to these interest-bearing vehicles is now positive. This is very good news indeed.

If you are an investor who continues to hold a significant portion of your wealth in a bank account as cash, the chances are that your money is not earning what it should or could be earning. A bank checking account is still losing out to inflation whereas either a bank money savings account or money market mutual fund are now very likely now outpacing inflation. Municipal bonds and US government bonds are also yielding much more than they were 18 months ago.

We at WealthPlan Group strongly encourage investors to evaluate the types of accounts they hold at their bank and the interest rate those accounts are earning. A money market fund may be the right move to make at this time to increase the yield on your short-term money. To learn more about money market investing and whether these types of instruments may be appropriate for you, please contact your WealthPlan financial advisor. We are here to help ensure your money is optimally positioned given the current yields available in the markets today.

 

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Advisory services offered through WealthPlan Group, a DBA for WealthPlan Investment Management, a subsidiary Registered Investment Advisor of WealthPlan Group, LLC.  WealthPlan Group, LLC is not a registered investment advisor, but is the holding company for WealthPlan Partners LLC and WealthPlan Investment Management, LLC.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which Investment(s) may be appropriate for you, consult your financial advisor prior to investing. Information is based on sources believed to be reliable, however, their accuracy or completeness cannot be guaranteed.

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