Part of the insanity of the early 2025 investment scene is the wild ride of bonds. Yes, even the stalwart US Treasury options have seen big moves due to the tariff situation.
There is a ton of money in money market funds these days because they were yielding up to 5% at one point. What’s not to love about that? Safe, liquid money earning 4.5% and up. Sign me up!
Just remember, the Fed giveth and the Fed can taketh away. If unemployment starts to rise and inflation cools off, the Fed may decide to lower that short term lending rate and your juicy money market returns will immediately take a hit.
Reminder, that’s just the INTEREST, the principal should stay $1/share as always.
If you are sitting on a large emergency fund, or money to be used for a big purchase in a year or more, it’s still not too late to buy bank CDs or individual bonds.
Buying the actual CDs or bonds (as opposed to a fund) lets you know that the money you have set aside for a particular purpose or time frame will be there when you need it.
For example, if you plan to go on a $10,000 photo-safari in 2 years, you could buy a bond or CD maturing to coincide with your trip. You will lock in the interest rate (no worries about Fed rate cuts) and know the principal will be there when it’s time to book your arrangements.
Ask your financial advisor to look over your emergency fund and short-term cash stash to make sure you are making the most of your safe money.
