Are you looking for some safety (like an insured deposit) in your investment portfolio, and still want to receive interest? It’s possible… if you use the correct strategy. Read to see how a client and I navigated the tension between safety and growth.

I recently met with a woman who felt her advisor had put her into the wrong investments. She explained, “Doug, banks are paying low interest, and my financial guy doesn’t seem to have anything that looks good to me. I heard from one of your clients that she got high-paying, insured bank deposits through your office. I even read the article on your website about getting steady income from investments (profile-financial.com/steady-income). What are you showing your clients?”

I replied that I’m glad my customers spoke positively about the service we give at Profile, but the most important thing for all investors is to evaluate their own situation before investing anywhere. 

Making money on bank deposits

When we talk about bank deposits, we’re referring to “CDs” – Certificates of Deposit in a U.S. bank that is insured by the FDIC (Federal Deposit Insurance Corporation). Through an American brokerage account, clients can purchase CDs, which offer a fixed interest rate and a variety of maturity dates. One can invest funds for the very short term, such as a month or two, or for many years. Normally the longer maturity dates provide a higher interest rate. Since the Fed has raised interest rates in 2022, it’s possible to earn returns of between 4.5% to 4.75% on 12- to 18-month CDs (check with us to see current rates since the time of this publication).

Inflation eats away at real returns

Critics of fixed-income investments point out that inflation will lower the “real rate” of return that you can make. That’s true. If the inflation rate is greater than your fixed interest rate, your real rate of return is lowered. However, for conservative investors who can’t ride out market volatility, insured deposits may still be better than earning nothing by keeping the money in a non-interest paying account.

If you’re interested in looking at CDs for your portfolio, be in touch (02-624-2788). I’d like to hear about your situation to see if I can help.

Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.

Published December 13, 2022.

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