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Are 2-Year Treasury Notes A Good Investment Right Now?

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Key Takeaways

  • Treasuries are a risk-free way to invest your money.
  • While other types of bonds exist, investing in 2-year Treasuries have unique advantages.
  • Using the secondary market, savvy investors can build a Treasury ladder, helping them to maximize returns.

When it comes to the short term, the options for investors have been limited—not in the types of investments, but regarding the potential returns. Since 2009, the Federal Reserve has kept interest rates below 2.5%, making it difficult for investors to earn a decent return in the short term.

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All of that changed with the events surrounding the pandemic. Government spending, supply chain issues, lockdowns, and more contributed to inflation.

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To fight inflation, the Federal Reserve is raising interest rates. This means investors can earn a higher return on short-term investments, specifically Treasury bills. But are they suitable investments for you?

How Do Treasuries Work?

U.S. Treasuries are debt instruments backed by the U.S. government. Since most experts agree the U.S. government will not default on its debts, Treasuries are considered risk-free investments. In other words, there is an implied guarantee that you’ll get your principal investment back, along with interest.

The complication with Treasuries is how they are named. Treasury bills are bonds that mature in one year or less. Unlike traditional bonds that you purchase at face value and then earn a stated interest rate, Treasury bills sell at a discount to face value. When they mature, you receive the face value, and the “interest” you earn is the difference between your purchase price and the face value.

Treasury notes are bonds that mature in more than one year but less than 10 years. Treasury bonds mature in 10 to 30 years. In both cases, you purchase the bond for face value, and every six months, you earn the stated interest rate until the bond matures.

Investing In Treasuries

As of this writing, here are the current interest rates (APY) for various term Treasuries:

  • 4-week: 2.68%
  • 8-week: 3.05%
  • 13-week: 3.37%
  • 26-week: 4.00%
  • 52-week: 4.15%
  • 2-year: 4.34%

This is a risk-free rate of return that is hard to find in other investments. You could invest in I Bonds, which are yielding over 9% at the time of this writing. However, you cannot sell these for at least one year, and if you sell within the first five years, you forfeit three months’ worth of interest.

Compare the rate of the 52-week Treasury to high-yield savings accounts, and you are earning double that amount or more with the Treasury. Of course, you have to take into account inflation as well. With the August consumer price index (CPI) report, the inflation rate is 8.3%—double the Treasuries’ interest rate. In other words, you are still losing out to inflation by going this route.

The alternative option, the stock market, doesn’t offer a risk-free or guaranteed return either. Many economists believe that inflation will not be going any higher, so Treasuries could be a smart way to limit the loss of purchasing power.

Finally, consider what would happen if inflation fell over the next 12-24 months. If you think inflation will be below 4% within two years, then investing in five-year Treasuries and earning 4.15% is a great deal.

Treasuries vs. TIPS

TIPS, or Treasury Inflation-Protected Securities, act like traditional bonds but with a feature that allows the face value to change based on inflation. For example, if you purchase a 30-year TIPS bond with a 4% interest rate, you will earn 4% for the life of the bond. The face value, however, will go up or down based on inflation.

Earning interest, in addition to having the value of the bond increase in value, sounds like an ideal investment. The problem is there is risk involved with TIPS. If inflation drops, the bond will fall in value. So while you still earn the stated interest rate, it could be offset with the loss of principal.

Treasuries, on the other hand, will not lose value unless you sell them on the secondary market before they reach maturity. But if you invest strategically, using a bond ladder with various maturity dates, you should avoid running into this problem.

If you were to invest in a TIPS mutual fund or exchange-traded fund, you also open yourself up to principal loss here. Even if you don’t sell, but other shareholders do, the fund’s overall value will decline. This is evident in the iShares TIPS Bond ETF (TIPS), which is down 11% for the year as of this writing.

If you want to invest in TIPS, purchase individual securities and the shortest term possible (five years) to limit your potential losses.

Treasuries vs. Corporate Bonds

Corporate bonds have various maturity dates like Treasuries and pay a competitive interest rate, depending on the bonds rating. But the same issues we saw above with TIPS also play out with corporate bonds.

If you invest in longer-term corporate bonds, you can lose money if you have to sell before the bond matures. If you invest in a mutual fund or ETF, you will lose money as other shareholders sell. For example, the Vanguard Total Corporate Bond Fund (VTC) is down more than 18% for 2022 as of this writing.

To protect yourself, purchase individual corporate bonds for the shortest term possible or bond funds that have a short duration.

Are Treasuries Right For You?

At the end of the day, you have to look at your financial situation, goals, and risk tolerance to determine your best investment. There is no perfect investment to try to keep pace with rising inflation.

All you can do is make smart choices to protect your money and help it grow safely. For some investors, this might mean investing in Treasuries. For others, buying individual corporate bonds might make the most sense.

How To Buy Treasuries

There are two options for buying Treasury securities. You can visit TreasuryDirect.gov, where you can purchase them directly from the U.S. government. There are no fees or commissions. However, you can only access your bonds through this website.

The other option is to buy from a bank or broker. This is known as the secondary market, and it has its advantages and drawbacks. The benefit of this option is you can purchase Treasuries with different maturities. Since you can’t buy a four-month Treasury directly, you can purchase this term on the secondary market. The catch is it won’t be an exact four-month bond. Instead, it could be a 6-month bond that matures in four months.

The downside to the secondary market is you are likely to pay a fee or commission, and the interest rate you earn will be slightly less. However, most investors that go this route agree that the flexibility of bond terms and having all their investments with a single broker is worth it.

Finally, while you cannot purchase Treasuries through a Q.ai Investment Kit, there are various fixed-income kits to choose from that could offer you a similar risk profile, time horizon, and return as a bond. For example, the Inflation Kit invests in TIPS, commodities, and precious metals to help keep your cash from losing purchasing power.

Bottom Line

Now that the Federal Reserve is raising interest rates, short-term investors have more options for earning a competitive interest rate. The only thing left is figuring out which investment option makes the most sense for your goals, risk tolerance, and time horizon. Once you understand this, you will have a good idea of where to invest your money.

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Core Asset Wealth Management Launches Socially Responsible Investment Strategies – Yahoo Finance

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Core Asset Wealth Management is a financial management company. Recently, the company has incorporated SRI and Gene Therapies into its services.

Seoul, South Korea–(Newsfile Corp. – December 3, 2022) – Core Asset Wealth Management approaches socially responsible investing (SRI) in the latest development and seeks to maximize investment returns while avoiding companies that harm the environment or society.

As socially responsible investing has evolved into Environmental, Social, and Governance support, Core Asset Wealth Management is facilitating its clients with sustainable investment strategies. As the name implies, it is an investment process that considers environmental, social, ethical, and governance issues before allocating funds. All investors want to see their portfolios grow, but not at the expense of ethical practices, society, or the environment. Popular sustainable industries have recently included solar, wind, waste management, and water filtration.

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Core Asset Wealth Management investment planning is not just about finding ethical and socially responsible companies to invest in but also about taking an activist role by using their voting rights to affect change.

The company is focusing on Gene Therapy. It delivers an innovative yet controversial area enticing to invest in due to the possibility of curing previously incurable diseases. However, many ethical issues arise from the processes used, such as animal testing and the resulting changes that can occur in our DNA.

Core Asset Wealth Management uses many different socially responsible investment vehicles that can be used with Wealth Management. Stocks and bonds are always readily available, but applying the various SRI filters can be overwhelming and time-consuming. Socially responsible mutual funds and exchange-traded funds are more accessible ways to participate in SRI investment. For accredited investors, more customized SRI investments are available such as hedge funds, venture capital, and private equity funds.

Furthermore, Core Asset Wealth Management focuses on Ethical investing and shunning companies that test their products on animals, provide harmful effects, or regularly engage in fraudulent or deceptive practices.

By avoiding investments in these companies, Core Asset Wealth Management sends a message that they disagree with their unethical operations and support businesses that improve their lives and community. Ethical Investments provide the opportunity to apply their moral beliefs to the company’s Retirement Planning and other accounts. Core Asset Wealth Management Ethical Investments meet environmental, social, and ethical criteria to be included in various socially responsible investment (SRI) vehicles. These investments are divided into multiple categories based on their grade of green qualifications to help potential investors evaluate their options.

With new developments, Core Asset Wealth Management has come up with the following additional services:

Green Investments – Light

Light green investments are the lowest part of the ethical investment scale. This responsible investing filter avoids gambling, military, defense, nuclear energy, “sin” related companies, and weapons manufacturers.

Green Investments – Medium

Medium green investments are in the middle and apply a more rigorous filter that avoids oil and gas companies and alcohol and tobacco.

Green Investments – Dark

Dark green investments apply the strictest filters for investment ethics. They screen out companies that are active polluters, ignore social issues and focus on renewable energies like solar, recycling companies, and water purification investments.

About the Company – Core Asset Wealth Management

Core-Asset Wealth Management provides financial analysis and consulting to a broad range of retail clients and businesses. It also facilitates its client with Account Management, Market and Media Analysis.

Potential clients should visit the official https://acg-wealth.com/ for further updates.

MEDIA DETAILS:
COMPANY NAME: Core Asset Wealth Management
Client Name: Timothy Houston
Contact number: +822 3782 6980
E-mail: info@acg-wealth.com
Website: https://acg-wealth.com/

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/146692

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Turkey’s CHP Vows $100 Billion of Direct Investment If Elected – BNN Bloomberg

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(Bloomberg) — Kemal Kilicdaroglu , the leader of Turkey’s main opposition party, promised to bring $100 billion of direct investment if elected to power in the elections scheduled for June next year.

“There will be at least $100 billion of direct investment in the first three years of our government,” Kilicdaroglu said in Istanbul on Saturday, speaking at an event at which the CHP unveiled some of its economic, political and social policies.

He also said his government would secure an additional $75 billion investment in the first three years, from pension funds and wealth funds abroad, among other resources.

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The event dubbed “The CHP’s Second Century Vision” included speeches from Kilicdaroglu’s top economic aides and prominent economists, including Massachusetts Institute of Technology professor Daron Acemoglu. 

Faik Oztrak, CHP spokesman and deputy chairman responsible for economic policies, said the party would appoint a central bank governor who is “respected by the whole world.” The governor’s aim would be to permanently bring down inflation to single digits, he said. 

Incumbent central bank governor Sahap Kavcioglu is frequently criticized by the opposition over his failure to rein in inflation. Annual consumer prices in October accelerated to over 85%, the highest in almost a quarter century. 

Under pressure from President Recep Tayyip Erdogan, who is fixated on economic growth ahead of elections, the bank has cut its interest rate for four straight meetings, lowering it to 9% last month.

Read more: Turkey Slashes Interest Rate in Line With Erdogan’s Demand

Erdogan is a self-proclaimed enemy of high borrowing costs and he has fired three predecessors of Kavcioglu for clashing with him on monetary policy. Acemoglu said inflation would be lowered only through “normalization” in monetary policy and by fixing policies on interest rates.

“Turkey’s company and bank balance sheets also need to improve. If companies and banks have negative balance sheets they can’t make new investments. And Turkey needs significant new investments,” he said. “This will again be fixed with the right monetary policy, right financial policy and resources.”

©2022 Bloomberg L.P.

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Is Fomo the new greed when it comes to investing? – Financial Times

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If investors insist on trying to time their moves in stock markets, said Warren Buffett almost 20 years ago, they should be fearful when others are greedy, and greedy only when others are fearful.

It is good contrarian stuff. And the time-honoured depiction of markets in the permanent push-pull grip of these two animal spirits has an enduring appeal because (nuance and caveats aside) it does actually explain a lot of market psychology quite neatly. The difficulty arises, as now, when greed and fear start defining themselves as the same thing.

In the parsing of the FTX collapse — and of a string of other recent debacles that seem ominously comparable as phenomena of the loose money era — fear of missing out (Fomo) has repeatedly emerged as the critical ingredient in the investment build-up before the fall. Fear, in this usage of the word and in the context of the FTX and wider crypto run-up, was creating something that looked an awful lot like irrational exuberance. This exuberance, in turn, was fuelling something that behaved from a market standpoint an awful lot like greed does during its periodic stints at the wheel.

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As the Fomo narrative has it, investment money (much of it under the auspices of large, seemingly respectable funds) thunders collectively into particular assets (in many cases, with minimal due diligence) not because it necessarily believes in the underlying opportunity but because the rewards are presented as unmissable and the consequences of delay or scepticism are somehow scary.

The idea is not novel, even if the acronym is. Similar thought processes have featured before in earlier crises. In 2007, Citi’s Chuck Prince famously stressed the need to keep dancing as long as the music was playing: a freely chosen indulgence presented as an unquestionable obligation.

So is the current version of Fomo just greed in disguise? It is tempting to think so or, at the very least, conclude that the word “fear” here describes a more discretionary and easily surmountable dread than, say, the fear of loss, value destruction or worse. The casting of Fomo as a genuine fear demands evidence that there is some price to be paid for missing out (of the sort shops experience, for example, during panic-buying prompted by public alarm). Self-recrimination for a bonanza skipped, or the wrath of a dissatisfied investor, do not quite count.

During the past half decade of tech-centric investment, however, Masayoshi Son’s SoftBank has led the way in instilling a more legitimate set of Fomo concerns for certain investors. When the first of his Vision Funds launched in 2017, the $100bn vehicle was explicitly designed to create a new genre of tech investment.

It did this (or planned to) by using its scale not just to identify potential winners but to shower them with enough funding to ensure that, on metrics such as market share, they probably would be. This implied guarantee of dominance, however flawed, set a tone that would resonate: if investment is not about prospects but sure things, then Fomo is not greedy but wise.

With tech and crypto Fomo now in some limbo, a much larger and more complex version now sits on the horizon in China, and could dominate corporate and financial investment next year. A good number of fund managers say they are already positioning themselves for a short-term “Fomo event”. A relatively quick reopening of China or a sharp relaxation of zero-Covid rules is a change that no global or Asia-focused investor can afford to miss. The feeding frenzy could ramp up very swiftly.

But the longer-term Fomo trade relates to geopolitics, and to the way in which US and Chinese industrial policies have set themselves sufficiently at odds with one another to make some form of decoupling look more inevitable. Behind the rhetoric of the US Chips Act and the Made in China ambitions are geopolitical shifts that could eventually oblige more and more companies — in the US, Europe, Japan, South Korea and elsewhere — to make some kind of choice between the two blocs. In some cases, this might take the form of redesigned supply chains and other “friendshoring” investments to allow dual-track manufacturing and sales.

For others, though, there may be serious pressure to rethink being in China at all. And business leaders and their investors should perhaps consider that there may be valid reasons to miss out on the world’s greatest gross domestic product growth engine. This, truly, will put the “f” in Fomo: the question is whether the fear is strong enough for companies to push back before it happens.

leo.lewis@ft.com

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