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If you allow me to complement your breakdown: - bonds: Definitely not 0% interest rate, definitely better than cash. You can expect around 1.5% in the US for I
by Galanwe 6y ago
If you allow me to complement your breakdown:
- bonds: Definitely not 0% interest rate, definitely better than cash. You can expect around 1.5% in the US for IG bonds. This is all relative to the default risk of course, the stronger your central bank, the less risky are the bonds, the less interests you earn.
- Real estate: you don't have to own it directly. This exposes yourself to a huge idiosyncratic risk. You can easily get real estate exposure while maintaining diversification and liquidity through REITs, which are trendy since at least 10 years.
There's a whole lot of other investments if you dare to look into it.
You can play with currencies (FX, IRS) if you have macroeconomic views.
You can play with debts (CLO, CDS) if you have views on the corporate debt market, etc.
- evandijk70 6y agoMost bonds in the EU are below 0% interest rate.
- Galanwe 6y agoHu... No. Only short term notes are negative.
- arcticbull 6y ago> You can expect around 1.5% in the US for IG bonds. Sure, but the fed's target inflation rate is around 2%. That means you're in fact losing 0.5% of your purchasing power per annum. That's just losing money slower. There is in fact, no alternative.
- mixmastamyk 6y agoAlso the interest will be taxed.
- Galanwe 6y agoNot sure how taxes work in the US exactly. Here in Hong Kong we have withholding tax but no capital gain tax, so you can effectively buy zero coupon 3 month govy notes tax free.
- blaser-waffle 6y agoDepends on the bonds. Bonds issued by the government (local/municipal/etc.) are often not taxed as an incentive to get you to lend money to the government.
- jopsen 6y agoIsn't currency (and many others) more of a zero sum bet -- useful for hedging if you are a business with expenditures in one currency and income in another. But if you're looking to invest cash on hand, and looking for a long-term upside. I'm not sure currency is good idea.
- TomMarius 6y agoNo, it's not "zero sum bet". There are real market fundamentals which you can take advantage of.
- Galanwe 6y agoDefinitely not a 0 sum game. You can perfectly have real strategies and earn money just betting on currencies, either intra curve (buy/sell different maturities on the same currency) or cross curve (one currency versus an other one). Theres actually quite a lot of hedge funds doing that. You will most likely want to start with a "carry" trade: buying a cheap currency by selling your $USD, and enjoy the higher interests on that currency.
- kevin_thibedeau 6y agoHigh interest savings accounts are still beating bonds.
- Galanwe 6y agoHigh interest saving accounts are bonds. There is no magical returns for no additional risk.