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In September, the Federal Reserve Open Market Committee made a long-awaited cut to the federal funds rate.
The reference interest rate is now between 4% and 4.25%. The board also signaled further rate cuts in the future, and the market now expects the rate to fall to 3.25% and 3.50% by 2026, according to Morningstar. (1)
Simply put, the United States has entered an easing cycle, which should benefit borrowers across the country. But whether you’re a saver or a lender, these rate cuts mark the end of an exceptional era. For retirees or someone living on passive income, it may no longer be as easy to generate high returns with savings accounts.
However, the simple truth is that you should probably keep your cash in the same places as before. Your emergency fund and other savings that you want to access easily should always be kept in safe, low-risk liquid assets.
Money you won’t need in the short term can be put into long-term investments that generate higher returns, like stocks. And stocks are generally said to rise when interest rates fall.
With rates falling, stocks could rise. And so far they have: Stocks have continued their bull run since the September rate cut.
While it might be worth investing in the stock market as rates continue to fall, it’s important not to put all your eggs in one basket. Relying too much on a single stock or market can put your portfolio at serious risk.
That’s why ETFs are an increasingly popular option among investors. You can think of an ETF as a broad basket of stocks, meaning you don’t have to do any research or pick stocks yourself. Instead, you can invest directly in a variety of stocks at once, easily spreading your risk and exposure.
Acorns is a micro-investing app designed to help you invest in ETFs with your everyday purchases. It was designed for those who are new to investing and want an easy way to grow their wealth without requiring extensive financial knowledge.
Every time you make a purchase with your credit or debit card, Acorns automatically rounds the price to the nearest dollar and puts the excess (the coins that would end up in your pocket if you paid cash) into a smart investment portfolio.
Depending on your risk tolerance, you can have the Vanguard S&P 500 ETF, which tracks stock market performance, or the more conservative iShares Core US Aggregate Bond ETF, which tracks the US bond market.
And if you sign up now and set up a recurring investment, you can get an additional $20 investment.
Beyond traditional savings and investment accounts, you may want to consider alternative assets in your portfolio. Stocks and bonds are still important, but they don’t necessarily capture all the opportunities that exist to protect your portfolio in a volatile market.
That’s where real estate can come in. One vertical is housing values: a $34.9 trillion market in the United States that has historically been reserved for large institutions, until now.
Homeshares allows accredited investors to gain direct exposure to a portfolio of owner-occupied homes in major U.S. cities through its US Home Equity Fund without the hassle of purchasing, owning or managing properties.
The fund focuses on homes with substantial value and uses home equity agreements (HEAs) to allow homeowners to access liquidity without taking on debt or interest payments. This can create an attractive, low-maintenance investment vehicle for retirement savers, with a minimum investment of $25,000.
Some experts recommend adding alternative assets, such as real estate, to your retirement portfolio, specifically in a 50/30/20 mix of stocks, bonds, and alternative assets. Unlike stocks, they are not tied to market swings and can reduce concentration risk, while providing a hedge against inflation as home values ​​rise.
With target risk-adjusted returns of 14% to 17%, Homeshares’ US Home Equity Fund offers investors access to the largest pool of US household wealth.
And for a limited time, Homeshares is giving Moneywise readers an exclusive 5% bonus on IRA investments.
Read more: There’s still a 35% chance a recession will hit the U.S. economy this year—protect your retirement savings with these five essential money moves as soon as possible.
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Morning star (1)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
