Low interest rates hit the conservative investors, especially retirees and pre-retirees. In the name of the game is to retirement income. However, with interest rates hovering around zero for so long, to create a real, substantial revenue – while maintaining a conservative stance – it has been a challenge, to put it lightly.
These challenges may become less daunting, however, as the climate on interest rates finally began to change. Here is what happened, what today means to conservative investors.
Tide turns; market crash, and then boom
At December 16, 2015, the US Federal Open Market Committee (Fed) announced that the first rate hike in nearly a decade. Economists had been looking forward to for a few months, I believe that ultra-low interest rates murine ES is hindered economic recovery from the Great Depression, more than 50% decline experienced by the S & P 500 Index from October 2007 to March 2009, although the economy It has been steadily increasing, economists believe that if interest rates return to near pre-recession levels, it would lead to faster economic growth and expansion.
When the members of the Federal Reserve to raise interest rates, they can not predict what will happen next. Nothing more than the uncertainty of the markets hate, and this is the first time since 2006 to raise interest rates since caused. January 2016 proved to be the worst start in the history of the stock market, the S & P 500 index finally bottoming out February 11, 2016, 1829 – More than a decline of 10%. Many investors chose to abandon their money during this period by pulling on the market. Caused by surging waves (ie, the volatility of the market) rate hike provoked nausea so they decided to go to the nearest lifeboat, but those who hung in the riding of investors experienced a less than 12% average annual return in 2016 [123 after the first 123]
Plans to further raise interest rates back on track 
Originally, the Federal Reserve in December 2015 but the response plan in four additional rate hikes in 2016 after its initial interest, the market rate hike, but until 14 December 2016, the Fed will gain enough confidence to raise interest rates again. This makes them completely lost throughout the year to raise interest rates four times a mark, but since they raise interest rates on December 14, the Fed’s press release crowded onfidence written in C, due to the sudden strengthening of the labor marketA multiple rate hikes throughout 2017, falling unemployment, increasing household spending and rising inflation.
Even under our belt two rate hikes, however, one-year CD at most local banks to pay a little more than 1%, and five-year CD is paying about 2%. The story is the same as bonds and US Treasuries. This is a big problem for conservative investors. With inflation hovering at 2.2%, meaning that you have money to invest in keeping up with inflation of these products, and you have been losing purchasing power.
Improve the plight of conservative investors
These traditional low returns on investment income bearing push more conservative investors venture capital S uses a greater return of hope. This phenomenon has been a significant influx of funds high dividend portfolio has consistently pointed out that observation, the financial industry. This is a conservative investor a dangerous game. Dividends can be an important source of income, but was over-weighted stock market provide little protection from market downturn. Market adjustment process may bring disaster to fund retirees from such a combination. Although 12 percent rate of return is very good, just like in 2016 for an annual return of the S & P 500 index, as a cast film experienced the beginning of the year will weaken the improper allocation portfolio.
In short, the Fed confident about the future of interest rates is good news. It offers hope, the traditional income – investment in production will be conservative investors a viable option again, as they look to balance their portfolios, while also generating income they need.
As a financial advisor, I trust the captain of my client’s portfolio, it is my job to see if I can get the customers they need income after retirement is not entirely dependent on the market. Let my clients a wide range of means, no matter what the beginning of the next set of surging waves, their portfolios can take water, but it will not sink.
Any part of such communications shall be deemed an offer to buy or sell any securities or to provide investment advice or recommendations. By GF Investment Services, LLC, FINRA / SIPC members, 501 cattle north securities man Road, Suite 106 Sarasota, FL 34232. (941) 441-1902. After the global financial private capital, limited liabilityAny company, SEC registered investment advisor providing investment advisory services. Registration with the SEC does not imply any certain level of skill or training.