With the Federal Reserve expected to cut interest rates in September 2024, I have adopted the following strategies to position your portfolio effectively.
1. Invest in Bonds and Short-Term Investments
When interest rates fall, bond prices typically rise. This makes bonds an attractive investment. Given the current yields, it is a good time to invest in bonds, especially when I am looking for stable income. High-quality bonds, such as government and investment-grade corporate bonds, can provide a safer investment option. To further leverage, I have bought TLT LEAPS and sold short term covered call.
I am also considering short-term investments like money market funds. These can provide liquidity and flexibility to take advantage of market opportunities as they arise.
2. Dividend-Paying Stocks
Stocks that pay high dividends can become more attractive as interest rates fall. These stocks often belong to stable, well-established companies that can provide a steady income stream. Here are the a few S&P 500 companies with the highest dividend yields as of July 2024:
1. Walgreens Boots Alliance (WBA) - 12.3%
2. Altria Group (MO) - 8.0%
3. Verizon Communications (VZ) - 6.6%
4. AT&T (T) - 5.8%
5. Crown Castle (CCI) - 5.7%
3. Real Estate Investment Trusts (REITs)
REITs can benefit from lower interest rates as borrowing costs decrease, potentially increasing their profitability and DPU. Here are the top 5 Singapore REITs with strong financials and high dividend yields as of 2024:
1. Parkway Life REIT (C2PU.SI) - Dividend Yield: 4.5%
2. Keppel DC REIT (AJBU.SI) - Dividend Yield: 5.2%
3. Frasers Logistics and Commercial Trust (BUOU.SI) - Dividend Yield: 6.0%
4. Mapletree Logistics Trust (M44U.SI) - Dividend Yield: 5.5%
5. CapitaLand Integrated Commercial Trust (C38U.SI) - Dividend Yield: 5.7%
4. Growth Stocks
Lower interest rates can boost the stock market, particularly growth stocks. I am looking into SPY, QQQ and IWM especially after the recent retracement.
Above are my thoughts/strategies/plan. Please DYODD.
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