family life
What is Supplemental Life Insurance?
Supplemental life insurance is typically an additional policy that you can purchase to augment the group life insurance policy obtained via your employer. These policies can provide extra peace of mind when it comes to protecting your loved ones, but is more insurance always better? You may wonder whether purchasing this kind of policy is […]
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Consider Short-Term Bond Funds
Savers craving substantial bank and money market interest rates courtesy of the Federal Reserve are still waiting.
You might see 0.75% for six months by the second half of 2022, which I agree beats prolonged zero yields. But America’s banks have more deposits than they can lend and thus need not scurry to augment their savings rates in concert with Fed rate actions.
- SEE MORE The 7 Best Bond Funds for Retirement Savers in 2022
Bank profit margins, share prices and shareholder dividends will benefit. CD yields will barely budge.
Do not despair. The picture is brighter for fans of short-term bond mutual funds and exchange-traded funds (ETFs). Instead of being stuck with Treasury bills and puny bank rates, you can join the world of variable-rate corporate and real estate debt, taxable municipal bonds, packages of car loans and credit card bills, revolving equity credit lines, and the occasional soon-to-mature junk bond.
The durations and maturities are only two or three years, but unlike savers, lenders here have pricing power. That suggests these funds’ monthly dividends will rise, pushing yields beyond the current 1% to 1.5% and trending toward 2%-plus.Â
What Bond Funds to Buy Now
My favorite, FPA New Income Fund (FPNIX), is closed to most new accounts. But there are fine facsimiles, exemplified by Janus Henderson Short Duration Flexible Bond Fund (JASBX, expense ratio: 0.64%, yield: 0.82%), Thornburg Limited Term Income Fund (THIFX, 0.77%, 1.07%), T. Rowe Price Short Duration Income Fund (TSDLX, 0.40%, 1.90%) and USAA Short-Term Bond Fund (USSBX, 0.54%, 1.81%).
Load funds may be available without a sales charge at some brokerages. Any, or all, of these funds are positioned better for the year ahead than a plain-vanilla money market account or Treasury-focused ua-short fund.Â
Ignore how these and similar funds shed some value in the opening weeks of this year. They own the kind of stuff that benefits from a healthy economy and can withstand Fed rate hikes.
The T. Rowe Price fund holds more than 70% of its portfolio in corporate and securitized assets, such as bundled student loans and auto leases. It also owns some short-term IOUs from IHOP and Applebee’s that pay 4.19% now, which will reprice upward as overall market rates rise. The eateries are in fine shape now that road trips and normal family life have widely resumed.
USAA’s fund is more aggressive, holding energy and airline credit as well as a smattering of short-term loans to Mexican banks. But Mexico is not shutting down, and airlines are flying nearly full planes. This is how a fund can hold its duration below 2 (which means low sensitivity to rising interest rates) but distribute close to 2%.
Naysayers will note that in March 2020 many funds like these lost 5% of principal, negating three years of yield. But as long as consumers are in good shape to pay their debts in full and on time, and well-known businesses are solvent, the risk of loss from defaults or downgrades is nearly nil. And interest-rate gyrations allow the fund managers to take advantage of trading opportunities.Â
That leaves the perils of inflation and rising interest rates. If you are worried they will spiral faster and higher than we think will happen â in the spirit of the late 1970s â then stay away. I am still in the lower-for-longer rate camp, just not quite as low as before COVID â and that’s a bit of good news for savers.
- SEE MORE 2022’s Best Mutual Funds in 401(k) Retirement Plans
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Almost Debt-Free to Nearly $1 Million in Debt: Why We Moved to Nashville
We had just finished building our dream home only a few years ago. My businesses were thriving, and this allowed my wife and I to create a 3-year goal that sounded more like a fairy tale â paying off our mortgage. We had roughly $450,000 in our home, but we only had around $250,000 left […]
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Why the Racial Homeownership Gap Exists and How to Combat It
Homeownership is one of the strongest tools American households use to build their wealth, so why is the gap in homeownership between white, Black, and other minorities so prominent? Homes.com analyzes why this gap exists and how to combat it.
The post Why the Racial Homeownership Gap Exists and How to Combat It appeared first on Homes.com.
The Best Places to Live in Utah in 2021
Family life and the great outdoors are deeply embedded in Utah’s unique culture.
The post The Best Places to Live in Utah in 2021 appeared first on Rent Blog.
How to Help Your Kid with FAFSA, Student Loans, and More!
Itâs easy to assume that the role of a parent diminishes as a child approaches high school graduation. This is when many parents choose to step back and allow their kids to become the primary decision-makers in their own lives. …
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How To Teach Your Kids About Budgeting At The Farmer’s Market
Aside from cooking, if thereâs one important lesson I learned from my parents it would have to be about budgeting. I grew up in a large family of 6, and we enjoyed delicious home cooked Vietnamese dishes, so Iâve had…
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