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With the Recent Increase in Short-Term Interest Rates: Is it Time to Reconsider Protected Investments?


Short-term interest rates have recently gone up due to the ongoing challenges with higher inflation.  As a reminder, the U.S. Federal Reserve typically raises short-term interest rates to cool down the U.S. economy to help fight inflation.  I am sure we can all appreciate the desire to reduce the high cost of goods and services by raising short-term interest rates.  Since inflation has been stubborn and is not going down as quickly as had been hoped, short-term interest rates have started to rise.


For the month of April 2024, the U.S. two-year Treasury Note has seen a lot of changes.  On April 4th, it was at 4.65%; however, on April 25, it had moved up to a high of 5.00%. Although a 0.35% increase or 35 basis points increase may not seem like a lot, to change that much in a matter of three weeks is a big deal.  Compared to 2023, it’s a whole 1 percentage point higher.


However as long-term investors, as interest rates go up this also presents an opportunity to get higher investment returns for our Protected Investments.  Remember, Protected Investments are more conservative investments because they protect your principal or the initial amount that you use to invest while also offering investment returns through the interest rate that it provides.  Examples are Money Market Funds, Certificate of Deposits (CDs), and U.S. Treasury Notes and U.S. Treasury Bonds.  Some Protected investments are offering two-year interest rates around 5% because of the recent short-term interest rates increases.  This might be a good time to revisit your Protected Investments to make sure you are taking advantage of these attractive investment returns.


The U.S. two-year Treasury Note is a great Protected Investment that you may want to consider.  These are available through the U.S. Treasury Direct website.  However, if you find the U.S. Treasury Direct site too difficult to maneuver to buy and sell U.S. Treasury Notes and Bonds, then there are some other financial sites that you can use to make your U.S. Treasury transactions.  For example, the E*Trade and Charles Schwab platforms also have U.S. Treasury investments available.  Please see this helpful video from Charles Schwab (Note: Paycheck to Wealth is not affiliated with Charles Schwab and does not receive any compensation from the company.  This information is only provided as an educational resource).


Learn from the Charles Schwab video on how to buy U.S. Treasuries.  Please click here.


The key point is to make sure you are getting a great investment return on your Protected Investments.  If you are unsure about how to get started, please remember that Paycheck to Wealth is here to help.  Please contact Paycheck to Wealth to learn more about building a Protected Investment portfolio to meet your financial needs.  Please visit: www.paychecktowealth.com to get started.

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