Low Interest Rates – How to Respond to Poor Portfolio Performance

downturnAs has been the case for many months, low interest rates continue to cause poor portfolio performance for many. One issue is using CD’s as a primary investment tool. While CD’s are very safe and require little monitoring, low interest rates and lack of loan demand are causing CD returns to be very small.  The Fed has alluded to raising the rates in the future. Weeks?  Months?  Whenever it happens, the effects of this move will be slow to trickle through the market.

So what are the options for the Board and managers?  In addition to CDs in the fixed income investment arena, there are investment grade corporate bonds and preferred stock.  Each of these investment types presents their own challenges.  If you don’t understand the nuances and details of these investments, you are putting your company’s assets at risk.

You can acquire these with a broker, but the broker has no incentive (or requirement) to work in your best interest.  Additionally, the broker has no duty to monitor these investments once acquired.  It is up to the manager and/or the Board to make changes if the industry, markets, or general economics of the country change unfavorably. Just because a bond or preferred stock is investment grade quality at the time of purchase does not mean it will stay that way.  Hence, many companies are reluctant to move away from CD’s.

At Financial Fiduciaries, our job is to make transactions that are in the best interest of our customers.  We make brokers nationwide compete for our business by having them offer us their best pricing, whether we are buying or selling.  Since we purchase bonds for a significant number of mutual insurance companies, we can buy in large increments, which give us additional pricing power. More importantly, after the purchase of a bond or a preferred stock, we closely monitor the performance to ensure that it remains an appropriate investment.  In the end, it is important to work with an advisor you trust to make decisions that are in your best interest and not their own. If you would like more information on how to incorporate investments other than CD’s into your portfolio, please give us a call!

About Objectively Speaking

Tom Batterman, founder of Vigil Trust & Financial Advocacy and Financial Fiduciaries, LLC is in the business of representing the best financial interests of his clients. Having provided objective, fee-only financial management services for over two decades, he specializes in managing the investment and related financial affairs of individuals and mutual insurance companies who do not have the time, interest or expertise to manage such matters on their own. As an objective, unbiased professional who takes on a fiduciary responsibility to his clients, he guides clients to the financial decisions they would make themselves if they had years of training and experience and the time and expertise to fully research and understand all of their options. Founded in 2010 as an outgrowth of Vigil Trust & Financial Advocacy, Financial Fiduciaries, LLC is a financial management solution for individuals and mutual insurance companies who recognize they do not have the time, interest or expertise to properly attend to their financial matters on their own. While there are many financial “advisors”, most of them have investment products to sell and the “advice” they provide is geared toward getting their clients to engage in a purchase. As one of the rare subset of advisors known as “fiduciary advisors”, Financial Fiduciaries does not sell any investment product so its guidance is not compromised by conflicts of interest which plague ordinary advisors. Prior to his employment in the financial industry in financial advocacy and trust positions, he worked at a private law practice in the Wausau area in the areas of estate planning, tax, retirement planning, corporate organizations and real estate. He is a graduate of the University of Wisconsin-Madison and the UW-Madison Law School and has during his career held Series 7, 24 and 65 securities licenses. A longtime resident of the Wausau, Wisconsin Area, Tom is active in the community. He enjoys golf, curling, skiing, fishing, traveling and spending time with his family.
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