COMMENTARY | Lately I've been getting the feeling that the Fed is trying to push me toward spending more or taking on more risk. According to a recent USA Today article:
"The Federal Reserve on Wednesday agreed to keep a key short-term rate near zero until the 7.7% unemployment rate is 6.5% or lower.
The short-term rate will also stay unchanged at 0.25%, the Fed said, until the current 2.2% inflation pace hits 2.5%. Tying the one rate it controls to unemployment and inflation targets is unprecedented, economists said.
The Fed's aim is to spur economic growth and lower long-term borrowing costs for consumers and Corporate America."
To me, this equates in some ways to promoting fiscal irresponsibility and increased risk for the common man like me. So while they may be doing their best to push me toward spending away my retirement future, I'm doing my best to remain responsible and avoid risk if at all possible.
Low Interest Rates
It seems like everywhere I look, interest rates on low-risk savings are almost nothing. Certificates of deposits, savings accounts, treasuries, and even inflation-based government savings bonds (which makes very little sense to me since inflation seems to be rampant these days) aren't giving that great of returns.
Still, I don't let this deter me from accumulating some secure savings. Bolstering our emergency fund with a little more cash seems like a fine idea to me at the moment since it provides me with an option through greater liquidity to take advantage of investment opportunities if or when they should present themselves.
Stock Market or Nothing
It almost seems like these days it's the stock market of nothing for the average investor. Either we fund our IRAs, ROTH IRAs, 401(k)s, 403(b)s, 529s, and the likes, or that's it. We're presented with a variety of investing roads that seem all to lead to the same destination…the stock market.
To me, investing is more than just selecting the same investment type with a different name. Therefore, I've been looking for options outside the ones the talking heads on television and the federal government are advocating. I seem to remember a similar situation to this with everyone saying I needed to be in the housing market several years ago…and that didn't work out too well.
Are there any Safe Options?
After looking around the investment environment, it just doesn't seem like there are many good options out there that present a reasonable return with minimal risk. However, I've found a few things that I think could work in certain situations.
So what am I looking at as ways to invest without upping the risk ante too much? Well, they might not all be viewed as conventional items, but I don't feel we're currently in a conventional sort of economy.
My first option is spending. Yes, I said spending. But not just going out and blowing money on frivolity. I'm talking about smart spending. While I'm not a commodities trader, I can still invest in a variety of agricultural commodities by way of the local grocery store or resale shop. From buying certain fruit, veggies, meat, and dairy products that can be, or are frozen, dried, or canned, when they're on sale, I can get a jump on inflation. Similarly, I might do this with items like cotton when out buying clothes. Even if I don't need such items immediately, I can save money by buying them now, in the near term, as long as I'm sure I'll use them over the long term. My other commodity pick right now is silver, since it is affordable and relatively easily attained in physical form.
Debt reduction is another of my investment opportunity picks. I've made this a focus with our family over the past decade. As long as I can find debt (like our previous mortgage) with interest rates over and above what my money could make for me sitting in safer investments, I'd rather use that cash to pay off or pay down that debt rather than lose money on the interest rate differential.
For me, the conventional way isn't always the best way when it comes to investing.
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The author is not a licensed financial professional. This article is for informational purposes only and does not constitute legal or financial advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.
Davidson, Paul. USA Today. "Fed ties interest rates to 6.5% unemployment". December 12, 2012. http://www.usatoday.com/story/money/business/2012/12/12/fed-buys-treasuries/1762459/
January 22, 2013.