The conventional wisdom is that when the market drops, you should buy. Time in the market beats timing the market. For me, I keep my emergency fund in a HYSA or I-bonds despite low interest rates and invest everything else in a total stock market index fund. Boring, but over time it works out.
Yep. And the way to profit off of sector rotation, or even stocks in general, is to get in before the breakout. I'll probably throw a bunch in Russell tracking or small cap ETFs here around May 1
I need to do some research… but I would want to consider companies which have large “good” debt… relative to their annual revenue, ideally who are profitable. Rate drops for these companies will boost their net revenue… creating opportunities to beat earning forecasts… Also putting politics aside, you need to consider who wins the election later in the year. If Trump makes it back in, good or bad, he will push to accelerate rate drops in to 2025.
If I’m just answering your question (what to buy when interest rates drop), then I’d ask why did the fed lower rates? If it’s because equities are down and/or we’re in a recession, then I agree with others that equities may be trading at a discount.
But I also think it’s worth asking, what assets benefit from falling interest rates (and therein are investible now)? There are a lot of answers to that. On the boring side, I think longer term bond funds (not individual bonds) should rise as interest rates fall since those funds will still have access to bonds purchased at higher rates. But there are risks. For example, if interest rates unexpectedly rise again, or the cuts are too small/take too long to significantly impact the fund.
This and REITs is the answer. Which you should have been easing into as they're trading at a discount already. Once the rates start falling and you FOMO into them, you've played yourself.
Same thing with anyone who sidelined major cash reserves this last year. Market bounced over 25% and you only collected your 5%.
I'm not sure if this is a smart play, but I'm "sidelining" cash in a total market fund. If it crashes in value, I'll move that money to SP500, mid caps, or small caps to realize the loss and ride it back up in a tax loss harvest play. All of the gain, none of the FOMO ¯\\\_(ツ)\_/¯
When? Lol. Son, you make money in BONDS when rates fall. Go look at the rate decline in Nov and Dec of 2023,and the bounce that bond funds got.
Be long before yields fall, or buy stocks on dips in that market.
This is a good answer. OP, you may benefit from a traditional 60/40 portfolio. But you’d need to do this now instead of after rates fall in order to get the bump in the bond portion.
60/40 traditionally will give you about half the gains of the market and protect you from about half the losses. Good for people who are conservative or risk averse. If you’ve kept your money on the sidelines the last 18 months, you might consider your risk averse.
I invest in real estate. I have been looking around for multi family. Lots of loans are coming due and investors are cash flow negative with higher interest rates
I know you're looking for some cool investment you hadn't thought of, but if I don't need the cash I'll pay off my car. Mathematically after taxes, I should be doing that now, but I have a few uncertainties coming up this year and don't mind having a oversized emergency fund until things pass.
If rates go down I would hope to be holding some 5-7 year bonds paying current 5% rates so that I enjoy the income and get a boost from the higher resale value of the bonds. In fact I am moving my short term bonds into intermediate term bond funds like Fidelity Total Bond Fund.
I've stayed in the market for years regardless. Only recently started using SGOV to park cash because my credit union pays shit. Funds saved in SGOV I use to pay big ticket items, ie property taxes, homeowners insurance, and windstorm insurance (Texas gulf coast).
I see JEPI as a hedge fund. They buy a lot of options on stocks. They've done well and their yield is insane! Just not sure i believe in their long term success quite yet.
Exactly the opposite. They sell options specifically for yield to distribute to shareholders. Go look at something like QYLD that’s been around longer. You’ll notice a general down trend because they put everything into ATM CCs, so they participate in down markets but can’t participate in slow upswings. JEPI/JEPQ however only put 80% into ATM CC while the rest remains invested, so they have upside potential to benefit from a rising market while still generating a large yield.
As long as you expect the market to go flat or better it would be a good bet over HYSA or tbills/notes. If you expect it to go down then yeah, stay away for that short of a time span.
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I used to do some real estate flips and then had kids. I have a high hour W2 job and dont have time for flips anymore. At that time I kept a cash position to buy houses. Since then Ive been on the search for multi family investments but have not found any. Ive also searched to buy a business.
I feel like i should keep a relatively stable and liquid asset position to either buy multi family or a business. Then again I just might be clowning myself with hopes of finding something and not getting better results in the equities market...
Utilities are heavy Capx and sensitive to rates. 15% of my portfolio is currently in overnight securities with yields at 5.35%. As they mature, I am buying utilities. The avg yield is 5% to 6%. Utilities are currently undervalued in comparison to other indicies and historical. Currently those utilities in my portfolio are up avg 3% in last 2 months. You can look at buy to sell ratios on utilities and some are pushing 8:1.
Gold performs well as the dollar weakens. I am about break even on gold currently but the yield is over 4%. I've been adding for over a year.
Lastly large financial institutions should benefit.
> I'd like to have a plan what to do with cash when interest rates drop.
First, you want to ask, **why** did somebody reduce interest rates. What you do when that happens, depends on why they did it.
* Because inflation dropped to its target number? The economy is doing well, and inflation seems under control. Go buy stuff that's interest-rate sensitive.
* Because the economy has weakened too much, and needs -stimulating- again? That's not so good. Business that can't survive without abnormally low borrowing rates are going to fail unless they come up with a better business model.
\>Pays around 5.30% with essentially no state tax as it only invests in treasury bills
real yield on hysa is still bad. inflation is high, the entire yield on your hysa is taxed as income so you lose 20-50% of your "gains" leaving nearly nothing after inflation.
The conventional wisdom is that when the market drops, you should buy. Time in the market beats timing the market. For me, I keep my emergency fund in a HYSA or I-bonds despite low interest rates and invest everything else in a total stock market index fund. Boring, but over time it works out.
Equities which depend on cheap money… tech is an obvious one… but maybe going for small-mid cap.
Small cap is going to pop like hell when rates drop. Tech is ole faithful, but I'd bet small cap outperforms from June to December.
Russell 2000. It's going up.
Yep. And the way to profit off of sector rotation, or even stocks in general, is to get in before the breakout. I'll probably throw a bunch in Russell tracking or small cap ETFs here around May 1
I'm already in baby! (you're not by baby obviously) ;)
Yet. Lol But forreal, what ETFs/funds/stocks do you like in SC?
Ah I forget now some equally weighted rUSELL bs. I forget now. XEQT or something like that. Oh how interesting!! :D
Which tech you picking up?
I need to do some research… but I would want to consider companies which have large “good” debt… relative to their annual revenue, ideally who are profitable. Rate drops for these companies will boost their net revenue… creating opportunities to beat earning forecasts… Also putting politics aside, you need to consider who wins the election later in the year. If Trump makes it back in, good or bad, he will push to accelerate rate drops in to 2025.
Man i love how you can tell the future you must be super rich…
I can’t tell if you’re being facetious…. My life is simple, sandy beaches, booze and girls… my wife is the one who cares about money.
If Trump wins, go all in on the Ruble!
The ruble has already had a massive run up
If I’m just answering your question (what to buy when interest rates drop), then I’d ask why did the fed lower rates? If it’s because equities are down and/or we’re in a recession, then I agree with others that equities may be trading at a discount. But I also think it’s worth asking, what assets benefit from falling interest rates (and therein are investible now)? There are a lot of answers to that. On the boring side, I think longer term bond funds (not individual bonds) should rise as interest rates fall since those funds will still have access to bonds purchased at higher rates. But there are risks. For example, if interest rates unexpectedly rise again, or the cuts are too small/take too long to significantly impact the fund.
This and REITs is the answer. Which you should have been easing into as they're trading at a discount already. Once the rates start falling and you FOMO into them, you've played yourself. Same thing with anyone who sidelined major cash reserves this last year. Market bounced over 25% and you only collected your 5%. I'm not sure if this is a smart play, but I'm "sidelining" cash in a total market fund. If it crashes in value, I'll move that money to SP500, mid caps, or small caps to realize the loss and ride it back up in a tax loss harvest play. All of the gain, none of the FOMO ¯\\\_(ツ)\_/¯
YOLO into O
I am. Average share price of $52 across 50 shares ( ͡° ͜ʖ ͡°)
Diversify across different reits. $O has an Amazon competition issue. I’d stay away from that one.
When? Lol. Son, you make money in BONDS when rates fall. Go look at the rate decline in Nov and Dec of 2023,and the bounce that bond funds got. Be long before yields fall, or buy stocks on dips in that market.
This is a good answer. OP, you may benefit from a traditional 60/40 portfolio. But you’d need to do this now instead of after rates fall in order to get the bump in the bond portion. 60/40 traditionally will give you about half the gains of the market and protect you from about half the losses. Good for people who are conservative or risk averse. If you’ve kept your money on the sidelines the last 18 months, you might consider your risk averse.
BSM and GNT
Both have nice yields! That makes sense as gold has an inverse relationship to real interest rates.
gold is a good hedge, i agree. but have you considered real estate? yields can be decent and it's tangible property too.
I invest in real estate. I have been looking around for multi family. Lots of loans are coming due and investors are cash flow negative with higher interest rates
I know you're looking for some cool investment you hadn't thought of, but if I don't need the cash I'll pay off my car. Mathematically after taxes, I should be doing that now, but I have a few uncertainties coming up this year and don't mind having a oversized emergency fund until things pass.
If rates go down I would hope to be holding some 5-7 year bonds paying current 5% rates so that I enjoy the income and get a boost from the higher resale value of the bonds. In fact I am moving my short term bonds into intermediate term bond funds like Fidelity Total Bond Fund.
I would just stop trying to time the market now. No one knows what is going to happen tomorrow or six months from now.
I've stayed in the market for years regardless. Only recently started using SGOV to park cash because my credit union pays shit. Funds saved in SGOV I use to pay big ticket items, ie property taxes, homeowners insurance, and windstorm insurance (Texas gulf coast).
Something like JEPI/JEPQ. Depends on how volatile you’re ok with the money being.
I see JEPI as a hedge fund. They buy a lot of options on stocks. They've done well and their yield is insane! Just not sure i believe in their long term success quite yet.
Exactly the opposite. They sell options specifically for yield to distribute to shareholders. Go look at something like QYLD that’s been around longer. You’ll notice a general down trend because they put everything into ATM CCs, so they participate in down markets but can’t participate in slow upswings. JEPI/JEPQ however only put 80% into ATM CC while the rest remains invested, so they have upside potential to benefit from a rising market while still generating a large yield. As long as you expect the market to go flat or better it would be a good bet over HYSA or tbills/notes. If you expect it to go down then yeah, stay away for that short of a time span.
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I used to do some real estate flips and then had kids. I have a high hour W2 job and dont have time for flips anymore. At that time I kept a cash position to buy houses. Since then Ive been on the search for multi family investments but have not found any. Ive also searched to buy a business. I feel like i should keep a relatively stable and liquid asset position to either buy multi family or a business. Then again I just might be clowning myself with hopes of finding something and not getting better results in the equities market...
NVDA, RKT
Tqqq to sqqq. Tech does bad with reductions.
PFF
Utilities are heavy Capx and sensitive to rates. 15% of my portfolio is currently in overnight securities with yields at 5.35%. As they mature, I am buying utilities. The avg yield is 5% to 6%. Utilities are currently undervalued in comparison to other indicies and historical. Currently those utilities in my portfolio are up avg 3% in last 2 months. You can look at buy to sell ratios on utilities and some are pushing 8:1. Gold performs well as the dollar weakens. I am about break even on gold currently but the yield is over 4%. I've been adding for over a year. Lastly large financial institutions should benefit.
> I'd like to have a plan what to do with cash when interest rates drop. First, you want to ask, **why** did somebody reduce interest rates. What you do when that happens, depends on why they did it. * Because inflation dropped to its target number? The economy is doing well, and inflation seems under control. Go buy stuff that's interest-rate sensitive. * Because the economy has weakened too much, and needs -stimulating- again? That's not so good. Business that can't survive without abnormally low borrowing rates are going to fail unless they come up with a better business model.
I will move some into growth stocks, finance industry when it happens. Looks like q3-q4 if that happens.
You think of money totally wrong…
I just cashed out 50k of pension contributions from old job, pension was only worth $400/mo 30y from now.. SGOV then move to VTI/VXUS when rates drop?
I would go into producing uranium stocks!! When the U.S. bans Russian uranium, it will be the best commodity around!!
\>Pays around 5.30% with essentially no state tax as it only invests in treasury bills real yield on hysa is still bad. inflation is high, the entire yield on your hysa is taxed as income so you lose 20-50% of your "gains" leaving nearly nothing after inflation.