Rushville Republican

Business

August 31, 2012

Keep income producers working hard..Even when rates are low

RUSHVILLE — Next week, we observe Labor Day, which honors all the hard-working men and women in the United States. As an investor, you'd like to think that all your investments are working hard, too - including the ones that are producing income. But can your income-oriented investments be productive when short-term interest rates are at historic lows? Or can you find other investment possibilities that could potentially boost your cash flow?

The answer to both these questions is "yes" - but you may have to take a closer look at where you stand on the risk-reward spectrum.Ê

For example, you might need to consider longer-term income producers, which typically pay higher yields than shorter-term equivalents.

Longer-term fixed-rate securities, such as bonds, must pay these higher rates to reward investors, who face both interest-rate risk - the possibility that interest rates will rise, causing the value of existing bonds to fall - and inflation risk, the threat of losing purchasing power by the time long-term bonds have matured. Still, you may be willing to accept these risks in exchange for the higher yields.

However, you may be looking for income producers that can work hard for you without having to hold them for a long period to maturity. This is because the "yield curve" - the line that plots the relationship between yield and maturity - is fairly steep right now, which, in English, means you can gain noticeably higher yields just by modestly increasing the maturity of your investments.

Your financial advisor can suggest some short-term and intermediate-term vehicles that may be appropriate for your needs. And while these rates will still not be as high as those offered by longer-term vehicles, they do offer flexibility

- along with less interest-rate risk and inflation risk.

You can also help protect yourself from these risks by building a "ladder" consisting of short-, intermediate- and longer-term bonds and certificates of deposit (CDs). Once you've built your ladder, it can help you weather changing interest-rate environments.

When market rates are low, you'll still have your longer-term bonds and CDs earning higher interest rates. And when market rates rise, you'll be able to reinvest your maturing short-term investments at the higher levels. If you need the cash, you can liquidate the maturing bonds and CDs.

Thus far, we've only looked at fixed-rate investments - but you may also be able to boost your income by owning dividend-paying stocks. Some companies have paid - and even increased - their stock dividends for many years in a row. If you're not in need of the cash, you can reinvest the dividends and boost your ownership stake, which is a key to increasing your wealth. But if you do need the money, you can take the dividends as cash. Keep in mind that income producers are not a "sure thing" because companies can decide to reduce, or even discontinue, their dividends at any time. In addition, history tells us that you may experience more price volatility from stocks, and they can be worth more

or less than the original investment when sold.

As you can see, you can find ways to keep income-producing investments working hard for you, despite the prevailing low interest rates. So consider your options, weigh the risks - and then work with your financial advisor to make those choices that are right for you.

Brian Humphrey is a financial consultant and investment advisor.

1
Text Only
Business
  • bus-rv080114-citizens pic Citizens State Bank expands local team Citizens State Bank has announced Samantha Coon as a new teller who will serve the Rush County market. She will be working at our Rushville branch located at 1802 N. Main St., Rushville. She brings a tremendous amount of team building and customer se

    August 1, 2014 1 Photo

  • Edward Jones Moves Up on the FORTUNE 500 List RUSHVILLE - Financial services firm Edward Jones moves up on the annual FORTUNE 500 list, as published by FORTUNE magazine, in its second appearance in two years, according to the following Rushville area Edward Jones financial advisors: * Brian D Hu

    June 13, 2014

  • bus-rv061314-fussner release pic Fussner completes 2nd year at Institute for Organization Management WASHINGTON, D.C.-- Institute for Organization Management, the professional development program of the U.S. Chamber of Commerce Foundation, is pleased to announce that Sandy Fussner, Executive Director of the Rush County Chamber of Commerce, has recen

    June 13, 2014 1 Photo

  • U.S. businesses boost April stockpiles 0.6 percent WASHINGTON (AP) -- U.S. businesses increased their stockpiles in April by the largest amount in six months, signaling business optimism that future demand will keep rising. Business inventories rose 0.6 percent after a 0.4 percent March gain, the Com

    June 13, 2014

  • Farm Credit schedules ribbon cutting RUSHVILLE - Farm Credit Mid-America, an agriculture lending cooperative serving farmers, rural residents and agribusinesses throughout Indiana, Ohio, Kentucky and Tennessee, will hold a ribbon cutting ceremony on May 29 for their new office in Rushvi

    May 16, 2014

  • Purdue NExT online learning program launches global website, now open to individuals, businesses, industry WEST LAFAYETTE -- Purdue NExT, an online interactive learning program, has launched its global website, offering 25 new classes. Purdue NExT is an outgrowth of PurdueHUB-U, an online education initiative announced in 2012. It is based on HUBzero, a p

    April 25, 2014

  • Student business competition announces finalists, Demo Day presentations WEST LAFAYETTE - Three Purdue University student-based startups have advanced to the final round of the Boiler Mini-Accelerator Competition or "Boiler," where they will compete for nearly $10,000 in funding. The Boiler, a student-run business competi

    March 28, 2014

  • Congressman Messer honors training program Congressman Luke Messer has made it a matter of Congressional Record that he strongly supports the Manufacturing Matters fast track training program in Rush, Wayne, and Fayette counties. In the Congressional Record dated Feb. 25, 2014, he congratulat

    March 14, 2014

  • bus-rv022814-citizens bank pic Citizens State Bank recognizes 2013 award winners Citizens State Bank held their annual employee awards presentation on Feb. 17, 2014, at a companywide training day. The Pendleton branch was awarded Branch of the Year for their overall performance. Employees from this branch are Alexa Chamberlin, St

    February 28, 2014 1 Photo

  • Wal-Mart offers weak outlook on sales shortfall NEW YORK (AP) - Much like its low-income shoppers, Wal-Mart can't seem to catch a break as the U.S. economy rebounds. The world's largest retailer on Thursday posted a 21 percent drop in fourth quarter profit and gave a subdued forecast for the curre

    February 21, 2014

Featured Ads
AP Video
Couple Channel Grief Into Soldiers' Retreat WWI Aviation Still Alive at Aerodrome in NY Raw: Rescuers at Taiwan Explosion Scene Raw: Woman Who Faced Death Over Faith in N.H. Clinton Before 9-11: Could Have Killed Bin Laden Netanyahu Vows to Destroy Hamas Tunnels Obama Slams Republicans Over Lawsuit House Leaders Trade Blame for Inaction Malaysian PM: Stop Fighting in Ukraine Cantor Warns of Instability, Terror in Farewell Ravens' Ray Rice: 'I Made a Huge Mistake' Florida Panther Rebound Upsets Ranchers Small Plane Crash in San Diego Parking Lot Busy Franco's Not Afraid of Overexposure Fighting Blocks Access to Ukraine Crash Site Dangerous Bacteria Kills One in Florida Workers Dig for Survivors After India Landslide Texas Scientists Study Ebola Virus Smartphone Powered Paper Plane Debuts at Airshow Southern Accent Reduction Class Cancelled in TN
Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.