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● USA Today
2023 Best Financial Advisory Firms
usa today best financial advisory firms 2023 logo for wellspring financial

Award based on independent survey carried out by USA TODAY and Statista. Firms need to be nominated by a participant in the survey. No prior registration is required, and no costs are involved for the nomination. The recommendations for each firm are summarized and evaluated anonymously. 
In addition to the survey results, additional metrics (e.g., data in relation to assets under management (AUM)) will be included in the final analysis.

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May You Live in Interesting Times

 

The old Chinese proverb comes to mind when we speak about current interest rates; “May you live in interesting times”.  The problem for many folks is that subject is much more vibrant than their interest rates are at present.  In prior monthly communications to you, we have talked about equities / stocks, but let’s take a little time to talk about the other portion of your portfolio which is bonds / fixed income investments.

For perspective, some very interesting times and events are upon us.  Please note that inflation generally averages 3% a year.  With that in mind;

  1. 30 day Treasury bill rates have averaged 3.2% over the past 20 years.  They are currently 1/10th of 1%.
  2. If you are retiree who puts their money in the bank, your savings account is yielding 1/5th of 1%
  3. Security of principal can be had by buying long-term Treasury 10-yr Notes.  I just went to the official United States Department of Treasury web site and found you can get 1.67%.
  4. The German government had the unusual experience this summer of being able to offer investors a negative interest rate on their bonds!

Without resorting to higher calculus, you might depict a small problem here.  Inflation is what is surely eating money away in the mattresses.  However, if you put it in the bank and also earn less than 3%, you are losing money.  There’s no way to slice this story any differently.

Now, if you are in Italy, or Spain / Portugal, you do better and get rates of 6-7%.  That sounds better, but now we’ve got to keep in mind the Will Rogers attributed quote; “I’m not concerned about the return on my money.  I’m concerned about return OF my money”.  The reason rates are low in this country is the underlying assumption of our debt being safe…or at least a lot better in likelihood of payment than buying the structural problems of these European countries.

Which leads us to; how are you doing here?  Picking 4 very common funds used on the fixed income side and in your portfolios, their returns this year through August 31 are (annualized price performance);

Five Year Global Bonds 6.30%
Selectively Hedged Global Bonds 4.32%
Short-term Extended Quality 4.64%
Investment Grade Portfolio 7.00%

We’re not saying these returns are as high as they would have been 20 years ago, but given the alternatives, “not too shabby” as my dad would have said.  And keep in mind, ALL your bonds invested here are investment grade, which is the highest quality bond available.  You are aware we do not like to have speculative risk on the fixed income side (we think ‘fixed’ should actually mean sometime in fixed income).  Lastly, you are currently the proud owner of over 1,000 bonds, which means you get those returns while being exceedingly well diversified.

Inflation, interesting times, and interest rates.  Though bonds might be a less exciting part of your portfolio, they are a strong element in the glue that keeps all things in place and on track.

I hope you may have found this information of value.  Just know we’ll always be keeping an “I” out for you.

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