What Should You Invest In?

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I have constructed a fictitious dialogue between whom I will call an INVESTMENT ADVISOR (IA) and the DEVIL’S ADVOCATE (DA). The first will give you the reasons why an investment is attractive, the second will give you reasons why that may be risky or even foolish today.

Short-Term US Treasuries, Money Market, CDs

IA: These are virtually risk-free and returning well over the current inflation rate. You can earn over 5 percent just by parking your money safely in any of these investments.

DA: The Federal Reserve appears poised to reduce interest rates in September, a result of inflation getting close to target and the apparent cooling in the employment picture. Federal Reserve Chair Jerome Powell has said: “We need to get ahead of any possible economic slowdown.” That could mean your interest rates with these short-term investments will be falling.

Long-Term US Treasuries and High-Rated Long-Term Bonds

IA: For the past five years, the market value of long-term bonds has fallen precipitously, as rising interest rates to fend off inflation cratered their prices. Now, however, if interest rates finally begin to fall again as the Fed stimulates a cooling economy, you can earn the coupon interest while also enjoying a capital gain as the market price increases.