From Dennis Miller of Casey Research:
It can be mighty hard to earn any interest at all in today's banking environment. Many investors are looking to riskier investments to find the kind of returns they once got from an FDIC-insured CD or even a savings account.
But don't despair. There are still a few decent ways to make your cash earn some income without putting it at too great a risk.
My wife takes care of our filing, and during one of her filing sprees some time ago, she walked into my office with the brokerage statement for her IRA and asked me why the interest was less than $1. "Interest rates have gone down that much," I said.
She replied, "That’s terrible," and turned around, went back into her office, and stuffed the statement into the appropriate file.
Inflation was eating away at our savings, and our broker had nearly stopped paying any interest at all. When I sent him an email, he wrote back: "I am sad to say the current yield on our money market fund is 0.01%. If we travel back in time to 2007, that rate would have been around 4.00%."
I was shocked! I even made him spell it out, and he confirmed that was no typo; it wasn’t supposed to say 1% or 0.1%… it was actually 1/100 of 1%.
In one of our recently published reports, The Cash Book, we showed retirees how to protect their cash. Safety is essential for cash, but safe places – such as checking accounts, money market funds, and even ultra-short bond funds – offer virtually no yield, while the threat of inflation is very real.
Even with "official" inflation moving at a modest 3% per year, settling for a conservative money market fund's token yield of 0.05% or so means the purchasing power of your cash is leaking away. You need a yield that matches the inflation rate just to stay even...
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