Not long ago, the Federal Reserve announced that it would keep short-term interest rates near zero until late 2014. What effect will a prolonged period of low rates have on you, as an investor?
If you need income from your investments, you may have to look beyond short-term fixed-income vehicles, which may not keep up with inflation.
For starters, you may want to build a “ladder” of bonds of varying maturities. Then, if market interest rates are low, you’ll still have your long-term bonds earning higher rates, but if rates rise, you can take advantage of them by reinvesting the proceeds of your maturing short-term bonds.
You might also consider dividend-paying stocks as an income source. In 2012, companies are on track to pay out a record amount of dividends, according to data compiled by Standard & Poor’s. Be aware, though, that these same companies can cut or eliminate dividends at any time.
Work with your financial advisor to help ensure low rates won’t affect your income needs.
(Provided by Jeff Rencher, your Edward Jones financial advisor located at 614 Fremont St, next to the police station in Rupert, at 436-1520)