Making money: What the experts say

Low rates fuel market; Income for life; How to invest in hurricanes

Low rates fuel market

Unfortunately, improving earnings aren’t the only factor keeping the current stock-market rally alive, said Colin Barr in Fortune. “The real secret weapon is the Federal Reserve’s policy of holding interest rates near zero.” Although rates have been that low for 16 months, bulls think that most investors are just now realizing that their money’s been earning next to nothing in a money-market account. True, “a bubble may form, as investors who had been sitting out belatedly decide to chase the rally.” So far, however, that hasn’t happened. Stock funds actually have seen withdrawals of $36 billion, in total, since last July. Yet even though individuals are not yet speculating, if the stock market keeps climbing, advisors and portfolio managers may feel “compelled” to stay in stocks, lest they “look like an idiot to their investors.”

Income for life

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With life expectancies at all-time highs, the “need for lifetime income is huge and growing,” said Kimberly Lankford in Kiplinger’s Personal Finance. The simplest solution is to buy an immediate annuity to cover the gap between expenses and income. “You give an insurance company a lump sum and it promises to send you a monthly check for the rest of your life—no matter how long you live.” The size of the payout depends on interest rates and how old you are when you buy the annuity. A 65-year-old man who buys a $100,000 annuity, for instance, should be able to count on $8,112 in annual income—about twice what he could safely withdraw each year from savings. If you live long, it’s a deal; if you die early, you subsidize others.

How to invest in hurricanes

Instead of losing sleep over the latest “world-ending threat,” invest in the stocks that tend to go up when a “particular fear rears its ugly head,” said James Altucher in The Wall Street Journal. Worried about hurricanes? Three stocks have tended to move higher in the aftermath of the 10 most expensive hurricanes in U.S. history: Campbell Soup Co., steelmaker Nucor Corp., and medical-equipment company Hill-Rom Holdings Inc. Likewise, the next time a pandemic makes headlines, investing in vaccine-makers GlaxoSmithKline and Sanofi-Aventis could help inoculate your portfolio.

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