With interest rates way down and stock prices, as well as prices of various goods such as cars, way up, Bottom Line Personal asked six financial experts for some of the shrewdest money moves that savers, investors and consumers can make in 2021…
To Boost Yields
Amid shrunken interest rates, the yields on savings deposit accounts and many bonds have dropped to unattractive levels and are expected to stay there for years. Consider the following…
Consider a high-yield rewards checking account. These online accounts offer the highest yields of any deposit accounts, with annual percentage yields (APYs) of as much as 3%. To qualify for these high yields, however, you must meet monthly minimum requirements, which typically include making 10 to 15 debit card transactions…electing paperless statements…and/or having at least one recurring direct deposit or electronic fund transfer. My favorite high-yield rewards checking accounts: Lake Michigan Credit Union Max Checking (3% APY up to $15,000 and 0% interest above that). You can join with a $5 charitable donation. LMCU.org
Ken Tumin is founder of DepositAccounts.com, which monitors interest rates and new developments at more than 12,000 banks and credit unions.
Invest in investment-quality preferred stocks. These hybrid investments mix elements of dividend-paying stocks and high-yield corporate bonds, typically providing yields of 4% to 5%. How they work: Preferred stocks typically are issued at $25 per share, pay dividends regularly and trade on the open market. But their values fluctuate much less than common stocks in a down market, and they tend to move back up to their issue prices when the market recovers. Also, the dividends paid by many preferred stocks are “qualified,” which means that you pay a 15% or 20% tax rate on them instead of the ordinary income tax rates that apply to most corporate bond dividends. My favorite preferred stocks…
Affiliated Managers Group 4.75% Junior Subordinated Notes (MGRB). Affiliated Managers Group oversees $654 billion and owns many well-known boutique mutual fund companies, such as Yacktman Asset Management and Tweedy, Browne. Recent yield for new investors: 4.5%.
MetLife 4.75% Depositary Shares Series F (MET-PF). Metropolitan Life is the largest life insurer in the US. Recent yield for new investors: 4.5%.
To research these and other preferred stocks, go to QuantumOnline.com.
Harry Domash is founder and publisher of the Dividend Detective newsletter, Aptos, California, and author of Dividend Stock Investing: What You Need to Know. DividendDetective.com
To Boost Stock Returns
Investors face considerable ups and downs because the stock market remains overvalued by almost every historical measurement, plus the lingering effects of the pandemic could weigh on the economy. Consider the following…
Invest in an “equal-weighted” S&P 500 fund. Many investors
keep the core of their portfolios in funds that track the S&P 500 Index. But that index has grown increasingly risky because it is “cap-weighted.” The larger a company’s market capitalization, the greater its percentage in the index, which can lead to heavy exposure to overvalued stocks. Recently, five stocks made up about 20% of the entire S&P 500 (Alphabet, Amazon, Apple, Facebook and Microsoft). By contrast, an equal-weighted index allocates roughly the same weight to each constituent, allowing you to maintain diversified exposure to S&P 500 companies with a greater emphasis on mid-caps, smaller large-caps and undervalued stocks. My favorite equal-weighted S&P 500 fund…
Invesco S&P 500 Equal Weight ETF (RSP) invests about 0.2% of its portfolio in each stock in the S&P 500.
Neena Mishra, CFA, is ETF research director at Zacks Investment Research, Chicago. Zacks.com
Buy a closed-end infrastructure fund. These funds own dividend-paying stocks of companies offering services that help society function, ranging from transportation and communication facilities to sewage and electricity systems. The stocks tend to do well when inflation rises, which I expect this year as the federal government continues to pump vast amounts of money into the economy. Closed-end funds operate similarly to mutual funds except that they have a fixed number of shares and trade on stock exchanges. That means investors can pick up these funds at bargain prices if they trade at discounts to the value of the funds’ underlying holdings. My favorite closed-end infrastructure fund…
Cohen & Steers Infrastructure (UTF), which owns about 150 stocks, was down 6.7% in 2020 as of December 18 and over the past three years has sold at an average discount of 4.6%. Reason: Investors are worried that infrastructure companies such as airports and toll roads will continue to be weak as long as the pandemic persists. But this actively managed fund has largely avoided transportation-related companies. The fund’s performance ranks in the top 1% of its category for periods ranging from one year to 15 years. Recent yield: 7.2%. 10-year performance: 13.7%.
Bob Carlson is editor of the Retirement Watch newsletter. He is a managing member of Carlson Wealth Advisors and chairman of the board of trustees of the Fairfax County (Virginia) Employees’ Retirement System. RetirementWatch.com
Invest in silver-mining companies. The price of silver jumped 43% in 2020 to $25.75 per ounce through December 18. That’s still well below its 2011 high of $48, and it’s likely to keep rising. Reasons: A weakening US dollar, which is the benchmark for silver prices, is boosting the price. Also, industrial demand for silver is surging due to increased production of solar panels and electric cars, both of which use the metal as a key component. Although mining stocks are riskier than investing directly in the precious metal, they offer much higher returns during strong rallies. Two attractive silver miners…
Dolly Varden Silver (DOLLF), which owns mines in northwestern British Columbia.
Orex Minerals (ORMNF), with mines in both Mexico and British Columbia.
Frank E. Holmes is CEO and CIO of US Global Investors, San Antonio, an investment firm that specializes in natural resources and oversees $2.2 billion in assets. USFunds.com
To Get Better Consumer Deals
You can save hundreds, even thousands, of dollars just by taking some simple steps. Consider the following…
Wait until after the first quarter of 2021 to buy a new car. –Prices spiked in 2020 and continue to remain elevated. In September, the average cost of a new vehicle was 5% higher (or about $2,000 more) year-over-year. Prices of minivans and SUVs have risen the most. Examples: A new Honda Odyssey recently cost $40,717, up 13% from a year ago.
A Kia Sportage ran $29,697, up 11%. Reason: Pandemic-related shutdowns in manufacturing plants created extensive delays in the production of 2021 models, leading to limited supplies. By April 2021, the shortage will have subsided, allowing a greater selection and more attractive prices.
For a used car, be flexible about the type of vehicle. High used-car prices will persist throughout 2021 as more consumers look for older cars as a safer alternative to public transportation and as cash-strapped buyers remain cautious about shelling out for a new-car purchase. The price of an average three-year-old vehicle was 8% higher in September
2020 than one year earlier. For relative bargains on three-year-old cars, look at less popular types now such as mid-sized sedans, compacts and hybrids. Examples: Volvo S60, average price $18,715, year-over-year price change, down 8%…Ford Flex, $20,800, down 6%…Toyota Prius, $18,258, down 3%.
Ivan Drury is a senior manager at the automotive information site Edmunds.com, Santa Monica, California.