There are many strategies for investment income, but during this time of uncertainty with seesawing market, high inflation and the possibility of more interest-rate increases, some investors want safety more than anything else. If you want to protect your money and take best advantage of current interest rates while lowering your risk of having to make subsequent investments at lower rates, laddering a portfolio of bonds and bank certificates of deposits may work out well.
Ken Roberts, an investment adviser with Four Star Wealth Management in Reno, Nev., suggested doing this through U.S. Treasury securities and certificates of deposits at banks. ” You are sticking with high credit quality — the full faith and credit of the federal government for Treasury securities and FDIC insurance for the CD deposits,” he said during an interview. And it is easy to shop around for higher CD rates through your brokerage account or with the help of a financial adviser, while using the same platform to purchase Treasury securities. Bank CDs are covered in the U.S. by the Federal Deposit Insurance Corp. up to certain limits (described here). And if you are worried about exceeding FDIC deposit insurance limits, Quentin Fottrell has useful advice. If safety is your paramount concern, the reason you should hold your own bonds, rather than shares of a bond fund, is that you know how much you will receive when a bond matures. If interest rates rise after you buy a bond, its market value will go down, and vice versa. So if you buy a bond and are forced to sell it after rates rise, you will take a capital loss. But if you hold a bond until maturity …
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