Which assets will give the highest returns in 2022? I share the best high interest savings accounts and investments I could find at current interest rate and inflation levels.
I tried to find which kinds of accounts and investments can help us to offset the money-destroying effects of inflation.
-The Pursuit of Yield To Fight Inflation Intro
-High Yield Savings, Money Market, Checking Accounts
-Certificates of Deposit (CD)
-US Treasury Bonds
-Money Market Funds
-Stocks And Dividends
-Index Funds And ETFs
-Real Estate Investment Trusts (REIT)
-US Savings Bonds
-Summary Of Asset Yields VS Inflation In My Opinion
With inflation at 7%, that’s eating away the purchasing power of our dollars every day. So if we have our money in a very low yield savings account, we are losing a lot of buying power to inflation.
We know that the Federal Reserve is going to want to control inflation and bring it down closer to their 2% target by raising interest rates eventually. But right now the pickings are slim for people to have high interest investments that can truly combat the effects of inflation.
But if and when The Fed raises their Federal Funds Rate, or also known as benchmark rate, this will influence banks to raise their interest rates. So most likely we’ll be seeing better yields from savings, money market, and checking accounts later in 2022. We’ll also see higher interest rates in 2023 and 2024 as long as The Fed doesn’t have to lower interest rates again (in case of a recession or stock market crash).
The six best bank accounts offering both a savings and checking account I reviewed in a previous video are still relevant with current interest rates, and you can check it out here.
The stock market’s average rate of return of 7% comes from when the market’s historical average price to earnings ratio was at 15. If you divide 1 into 15, you get a rate of return of 6.7%. But with the S&P 500 having recently hit a Shiller PE of 40, this is suggesting future projected yields of 2.5%.
Wall Street is projecting the S&P 500 to return 4% on average in 2022, which is pretty mediocre compared to the glorious levels of return from 2019 through 2021. And with the S&P 500’s dividend yield of 1.23%, the current stock market return for 2022 could be around 5.23%. An S&P 500 index fund or ETF would probably perform better than US treasury bonds and corporate bonds, but it still might not keep up enough with inflation this year.
While individual stocks’ returns will vary, I would rather invest in individual companies’ stocks to have the best chance of offsetting inflation in 2022.
The US Savings Bond Series I appears to have an attractive composite rate of 7.12% currently, and this is especially high compared to the US Savings Bond Series EE at a fixed 0.1%. But the Series I is a variable yield bond tied to inflation, so the the current yield is valid for a limited amount of time and has other considerations you should keep in mind.
If you’re interested in learning how to take control of your finances and start becoming an investor like Warren Buffett, check out my free PDF guide.
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