Your Survival Guy

Preparing your investments and family for when disaster strikes.

Disclosure

  • Home
  • Your Survival
    • EMP Threat
    • Tucker Explains
    • Newport Gas Outage
    • Water
      • Emergency Water Storage
      • Let There Be Water
    • Get Your Gun and Your Training Now
    • Satellite Phones
    • Navy SEAL Survival Kit
  • Your Money
    • Coronavirus Infects Stock Market
    • Looking for a Better America
    • You Invest, They Win
    • Where to Keep Your Cash
    • Paris
    • How to Buy a Boat
    • Dead or Alive? The Future of Long-Term Investing
    • Is Vanguard too Big?
    • Cryptocosm and Life After Google
    • The Last Intelligence Report
    • The Truth Behind the S&P 500
    • RAGE Gauge
    • How Many “Retirees” Will Keep Working?
    • Your Retirement Life
    • You’ll Love This if You’re Dreaming of an Active Retirement Life
  • Weapons
    • Self Defense
    • Every Family Should Own at Least One Shotgun: Here Are Three
  • About Me
    • Preparing for Times Like These
    • My Videos/Pics
    • Music
      • RIP Neil Peart: You Will Always Be Remembered as a “Modern-Day Warrior”
  • You
    • Our Cabin on Kodiak, Alaska
    • If You Are in Pain, this May Help. It Helped Me.
    • How to Save for a Grandchild
    • FIRE! Financial Independence, Retire Early
    • Compound Interest
    • Arithmetic of Portfolio Losses
    • Maximum Portfolio Withdrawal Rate
    • An Efficient Frontier
    • Retirement Compounders
    • Counterbalanced Total Returns
  • Survive & Thrive
    • January 2021
    • December 2020
    • November 2020
    • October 2020
    • September 2020
    • August 2020
    • July 2020
    • June 2020
    • May 2020
    • April 2020
    • March 2020
    • February 2020
    • January 2020
    • December 2019
    • November 2019
    • October 2019
    • September 2019
    • August 2019
    • July 2019
    • June 2019
    • May 2019
    • April 2019
    • March 2019
    • February 2019
    • January 2019
    • December 2018
    • November 2018
    • October 2018
    • September 2018
    • August 2018
    • July 2018
    • June 2018
    • May 2018
    • April 2018
    • March 2018
    • February 2018
    • Welcome

How Low Rates Can Be a Killer

October 12, 2020 By E.J. Smith - Your Survival Guy

Governor Jerome H. Powell discusses monetary policy accommodation, risk-taking, and spillovers during the policy panel on monetary policy spillovers and cooperation in a global economy: GP_IF_111414_1705

Investors have a short-term memory—they forget what losing money feels like. Do you remember how everyone was reaching for yield leading up to the real estate crash? I do.

A lot of wealthy investors lost big time money trying to lock in a few measly points more than what the risk free treasury was (not) paying. Then the crash hit, and they not only didn’t get those extra points, they lost all of their principal. I’m talking big money.

Then, like clockwork, came the Monday morning lawsuits. Investors cried that they should have been made more aware of the risks they were taking. Some suits were settled, but many were not. It took such a toll on some that it ate up every waking minute of the rest of their lives—which ended, I believe, too soon because of the trauma of losing so much money, so quickly, over such little potential gain.

Wake up.

History repeats itself. If you’re getting above average rates, you’re taking above average risk, and all of the potential heartache that can come with it.

Jason Zweig writes in The Wall Street Journal:

A good yield is hard to find.

With interest rates so close to zero across the board, many investors are undoubtedly wondering whether they can afford to keep a portion of their portfolio safe.

In fact, you can’t afford not to.

Since the Federal Reserve is depressing interest rates, it seems only fair that I should depress you. So please allow me to point out that $100,000 in a savings account will earn, if you’re lucky, $220 in interest income in 2020. That’s $1,509 less than you would need to outpace inflation this year, estimates J.P. Morgan Asset Management.

As recently as 2010, the yield on your savings account would have nearly kept up with the cost of living. For most of the years from 1985 through 2007, the return on cash resoundingly beat inflation.

Today, at banks, the national average interest rate on savings accounts is 0.16%, according to DepositAccounts.com; the average one-year certificate of deposit yields 0.46%.

U.S. investors have amassed $4.79 trillion in money-market funds, says Crane Data, a firm in Westboro, Mass., that tracks cash accounts. Yet the average money fund yields a piddling 0.03% in interest income. In the third quarter, reckons Crane, investors pulled $238 billion out of these funds. Yield is so hard to come by that several asset managers have begun shutting down tax-free money funds.

Investing for income in this environment is like trying to squeeze water out of a fistful of sand at high noon in Death Valley. The standard advice from pundits and financial planners is to squeeze more desperately: If you take a lot more risk, you can wring out a little more income.

The following two tabs change content below.
  • Bio
  • Latest Posts
My Twitter profileMy Facebook profileMy Instagram profile

E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com
My Twitter profileMy Facebook profileMy Instagram profile

Latest posts by E.J. Smith - Your Survival Guy (see all)

  • Only You Know How Much Gold You Should Own - January 25, 2021
  • Unmasking Heath and Human Services Secretary Nominee Xavier Becerra - January 25, 2021
  • Your Personal Safety: Concealed-Carry How to Carry Your Freedom - January 22, 2021
  • Your Retirement Life: Meet Your BMW Club Racing Program Director - January 22, 2021
  • PANDEMIC Pushes Military-Grade Surveillance on Americans Like YOU - January 21, 2021

If you enjoyed this post, email it to a friend:

  • Email
  • Print
  • Facebook
  • LinkedIn
  • Twitter
  • WhatsApp

Related Posts

Trending

  • There's Always a Way Forward for Americans Like YOU
  • Your Personal Safety: Concealed-Carry How to Carry Your Freedom
  • PANDEMIC Pushes Military-Grade Surveillance on Americans Like YOU
  • How Are You Doing on a Local Level?
  • Do You Know Who’s the Largest Owner of Farmland in America?
  • February RAGE Gauge: Americans Focusing on What's In Front of Them
  • Don’t Be on Their Radar, Get Out of Debt Now
  • Tucker Explains: Who Is Biden Nominee Kristen Clarke?
  • The Fed is Sacrificing Retirees to Save the Banks
  • The Death of the Dollar and America's AA Credit

YOUR SURVIVAL GUY MUST READS

  • Cuomo’s Paint by Numbers Restrictions Ruled Unconstitutional
  • Who Wants to Live the Island Life? You Do
  • Disaster Prep in Our Newport Bunker and Your Survival
  • Why Vanguard is too Big: Part III: BOND ALERT
  • The Future May Surprise You: The Northeast Vote and the Blue Blob Cities
  • The Great Reset: Meet the Climate Czar and His War: Part V
  • Rich Grandchild, Poor Grandchild
  • Stimulus Rewards States That Have Abused Their Businesses the Most
  • It’s Never a Bad Time to Downsize Your Home
  • Joe Died Suddenly, What If It Were You?
Only if You’re Serious
Only if You’re Serious
Only if You’re Serious
Escape the City
Smith Family Robinson
Only if You’re Serious
Why Vanguard is Too Big for YOU
See Who's Missing the Boat
You Invest, They Win
Emergency Water Storage
Emergency Water Storage
Emergency Water Storage
Why Fidelity is Number One

Copyright © 2021 | Terms & Conditions

loading Cancel
Post was not sent - check your email addresses!
Email check failed, please try again
Sorry, your blog cannot share posts by email.