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Rising Interest Rates? Consider Adding Protected Investments



2022 has been a very difficult year with high inflation and rising interest rates. But why are interest rates rising and what can be done to take advantage of the rising interest rates to keep your wealth-building on track?


Interest rates are rising as the Federal Reserve and other Central Banks around the world try to slow down the rising rate of inflation or the higher prices that you and I pay for goods and services. I know you feel the effect of rising prices through your everyday living expenses. The Central Banks are trying to limit rising prices and get things back to a more moderate pricing environment.


Since rates are rising, you may want to consider taking advantage of protected investment products to benefit from the steep rise in interest rates that we have seen throughout this year. What is a protected investment? Protected investments are investments that keep your principal safe from financial market declines. It protects the money that you use to fund the investment and limits the losses of your purchase price. However keep in mind that protected investments are more conservative, therefore the growth potential is a lot less than more high potential investments like stocks or equity funds. However allocating some amount of your investments to these types of accounts is a good idea for your short-term wealth-building goals.

In this rising interest rate environment, shifting some investments to less volatile protected investment options like the following is a good way to add diversification to your portfolio. Examples of short-term protected investments include:


1) High Yield Savings Account ~ some are paying up to 3.50% annually with no minimums and FDIC insured up to $250,000 per account.

2) Short-term Money Market Account ~ some are paying 3.00% annually with no minimums and FDIC insured up to $250,000 per account.

3) Short-term Certificate of Deposit or CD ~ some are paying 4.00% for 1 year with no minimums and FDIC insured up to $250,000 per account.

4) US Treasury Bond [purchased from Treasury Direct] ~ it has a 1-year interest of 4.76% as of Nov. 1, 2022, although this investment is safe, but is not FDIC insured.

5) I-Bonds [purchased from Treasury Direct] ~ it has a rate of 6.89% for the next 6 months starting Nov. 2022, although this investment is safe, but is not FDIC insured.


Note: The information above is as of November 1, 2022. Interest Rates are subject to change.


From the five protected investment options listed above, the High Yield Savings Account and the Short-term Money Market Account each have variable interest rates that change periodically as the interest rate environment changes. Therefore if interest rates keep rising, these accounts will pay a higher rate of return. However the converse is true, if interest rates start to decline; so will the interest rates paid by these accounts. The other accounts: CDs, Treasury Bonds, and I-Bonds have a guaranteed interest rate of return based on the time period of the product. For example for a one-year CD, you are guaranteed that interest rate payment for the one-year period of the investment.

With so many options to choose from, how do you decide what works best for you? All of the investment products listed above are great protected investment options that will protect the value of your investment and provide guaranteed growth based on the interest rate that is stated. With the rising interest rates for this year, these guaranteed interest rates are among the best that we have seen in many years. For your short-term financial goals, these types of protected investments are a good option to include in your wealth-building plan.


Paycheck Check to Wealth is here to help you decide which investment option works best for you. Please contact us today to get you started by adding the best protected investment option to your plan to help you secure your financial future.

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