There are a number of reasons why it is good that the Federal Reserve has been gradually increasing the Federal Funds rate. One benefit is that these increases have resulted in a tangible benefit for savers. Interest rates on short-term cash alternative investments have risen nicely. Prior to the financial market crash in 2008, I was able to help people invest their short-term assets in investments that typically offered more attractive yields than was available through local banks. This was no longer the case after the Federal Reserve lowered the Fed Funds rate to near zero percent following the crash. I advised a number of clients during this time to move their short-term assets to their bank.
With the Fed now “normalizing” interest rates, we can again find more attractive yields than is typically offered by the banks. This can also be of benefit to businesses and organizations that carry meaningful cash balances. It is important to note that even short-term investments can have varying levels of risk as some are FDIC insured and some are not. In the same way that it is important when investing long-term assets to first examine the portfolio objectives, risk tolerance, time horizon and liquidity needs, the same holds true with short-term assets.
We charge a reduced management fee for this service, and our investment minimum is $100,000. If you believe we may be able to help you, please reach out to me and we can review your situation.
Glenn S. Rank, CIMA®
Certified Investment Management Analyst®