As interest rates keep changing, people and investors are looking for safe, easy, and dependable ways to invest their cash savings. Treasury securities, particularly Treasury Inflation-Protected Securities (TIPS), stand out as low-risk options backed by the United States government’s full faith and credit. At the same time, money market funds and CDs pay attractive yields. These products can supercharge your savings strategies.
Today’s economic reality includes record average vehicle financing amounts and spiking mortgage rates. In order to manage this complexity, it is important to know the risks and returns associated with different investment vehicles. Read on to learn more about these and other investment opportunities. It spotlights their unique measures and potential future yields to help people make informed financial decisions.
Understanding Treasuries and TIPS
Treasuries are government bonds and generally viewed as the safest investment in the world. Investors can have faith that they will always be sure of the receipt of their principal and interest payments. This confidence stems from the full faith and credit of the United States Government that backs them. That security scares some away from equities and instead makes Treasuries a popular option for investors seeking to preserve capital but still earn a decent return.
Among the different types of Treasuries, Treasury Inflation-Protected Securities (TIPS) offer a unique feature: they provide a fixed rate of interest every six months based on the current principal value. This is because when inflation increases, the principal value of TIPS increases too, protecting purchasing power over the long run. TIPS are issued in five, ten, and thirty-year maturities. This range provides flexibility for investors to choose the term that best meets their investment objectives.
For investors seeking stability, TIPS can be especially appealing during economic downturns. With inflation worries still lurking, TIPS can help provide a valuable hedge against increasing price levels. This defining feature is a pure boon to individuals and households who seek to safeguard their savings across decades-long horizons.
Evaluating Current Financial Trends
In June, the average amount financed for new vehicles hit $42,861 with an average repayment term of just under 70 months. Likewise for the used cars, which averaged $29,315 with terms approaching 70 months. These numbers further highlight the exorbitant financial bets people are forced to place in today’s auto market.
Moreover, the average rate on a 30-year fixed-rate mortgage was 6.74% as of the week ending July 24. This record rate further underscores the steep competition and challenging trends in today’s housing market. People now face much higher borrowing costs and uncertainty associated with variable interest rates.
Adding to the trend, personal loans have jumped to an average of 12.64%—a record high. These elevated borrowing costs force consumers to consider other ways to get ahead in their personal economies. Home equity lines of credits (HELs) and home equity loans (HELs) remain high. As it stands today, the average HEL and HELOC rates are about 8.25% and 8.26%, respectively.
Exploring Alternatives: Money Market Funds and CDs
If you’re looking for the greatest amount of cash savings, look to money market funds. It seems they can provide a more attractive alternative without assuming so much risk. As of July 29, the average 7-day yield across the top 100 money market funds was 4.12%. This yield provides a highly competitive return compared to a typical savings account.
No-penalty CDs with terms of six months to one year have become more appealing. Top rates on these CDs range between 4.30% and 4.45%, offering a safe way to earn interest without sacrificing liquidity. What’s more, investors can withdraw their money without facing any penalties, which renders these options especially attractive during times of economic uncertainty.
Short-term Treasury bills offer attractive yields right now. This is for a three month to 18 month term, with all anticipating returns in the 4% to 4.33% range. These short-term investments provide tools that enable savers of all kinds to benefit from current high interest rates, while preserving flexibility as they plan their financial futures.