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
  • 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

  • bus-rv011014-gburg Honda logo Honda Greensburg Plant and plants in Ohio perform in top 25 percent GREENSBURG - For the second year in a row, Honda's Greensburg automobile plant earned the U.S. Environmental Protection Agency's (EPA's) ENERGY STAR certification. The ENERGY STAR certification is given to facilities that perform in the top 25 perce

    January 10, 2014 1 Photo

  • Edward Jones ranks No. 1 in survey GREENSBURG -- For the 19th time, the financial-services firm Edward Jones ranked No. 1 in the WealthManagement.com./ REP. magazine annual survey of the nation's six largest financial services firms, according to the following Edward Jones financial a

    December 20, 2013

  • Local tax abatements may cause higher property tax rates overall MUNCIE - Communities are using tax abatements to spur business expansion or attract new firms, but the process may be the cause of higher property tax rates overall and cost millions in lost tax revenue, says a new report from Ball State University.

    December 6, 2013

  • INFBPW/Knightstown November meeting INFBPW(Indiana Federation of Business & Professional Women's Clubs, Inc.) Knightstown had the November meeting at Sugarbakers in Knightstown on Nov. 18 with Jackie Woolard, PSP as hostesses. Tina Williams, president, presided at the meeting. INFBPW/K

    December 6, 2013

  • bus-rv112913-ECDC pic Rush County ECDC aids local business The Rush County Economic and Community Development Corporation recently assisted Carthage Mill, LLC with a Small Business Loan Program loan to assist them in opening a sustainable agriculture business incubator with a focus on rural development certi

    November 29, 2013 1 Photo

  • Better Business Bureau encourages small businesses support INDIANAPOLIS - For the fourth year in a row, the Better Business Bureau is supporting Small Business Saturday┬« on Nov. 30. Small businesses are the cornerstone of any community, creating jobs, spurring local economic growth and giving back to society

    November 29, 2013

Featured Ads
AP Video
Raw: More Than 100,000 Gather for Easter Sunday Raw: Greeks Celebrate Easter With "Rocket War" Police Question Captain, Crew on Ferry Disaster Raw: Orthodox Christians Observe Easter Rite Ceremony Marks 19th Anniversary of OKC Bombing Raw: Four French Journalists Freed From Syria Raw: Massive 7.2 Earthquake Rocks Mexico Captain of Sunken SKorean Ferry Arrested Raw: Fire Destroys 3 N.J. Beachfront Homes Raw: Pope Presides Over Good Friday Mass Raw: Space X Launches to Space Station Superheroes Descend on Capitol Mall Man Charged in Kansas City Highway Shootings Obama Awards Navy Football Trophy Anti-semitic Leaflets Posted in Eastern Ukraine Raw: Magnitude-7.2 Earthquake Shakes Mexico City Ceremony at MIT Remembers One of Boston's Finest Raw: Students Hurt in Colo. School Bus Crash Deadly Avalanche Sweeps Slopes of Mount Everest
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.