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Add this asset to your retirement portfolio

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Longest Bond Duration

Longest Bond Duration

The first quarter of 2022 was tough for savers and retirees alike, and according to investment firm Charles Schwab, it was one of the worst seasons for fixed income in decades.

However, rising yields and shifting Federal Reserve policy have created a major buying opportunity, the investment giant says. After nearly three years of near-zero interest on fixed income, retired savers can finally earn attractive returns. But don’t just go buy any bonds: look specifically for medium to long-term bonds. Here’s why.

A financial advisor can help you plan for retirement and help you choose low-risk investments that align with your financial goals. Talk to a qualified counselor today.

Fed tightening creates a buying opportunity

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The beginning of 2022 saw a significant increase in Bond yieldsA massive sell-off and a change in Federal Reserve policy within two months. Charles Schwab had previously recommended that fixed income investors stick to short-term assets to reduce exposure, but with the appalling performance of the last quarter, change appears to be in the air.

Schwab analysts say it may seem counterintuitive to buy bonds at a time when the Federal Reserve is embarking on a series of interest rate increases – which are inversely related to bond prices – but the market has already discounted many of the expected price drops.

Why are bonds recovering now?

There are some indicators that Schwab analysts say point to a buying opportunity.

The Bond yield curve It jumped and held high, which means the market is already ruling out a fast pace of Fed rate hikes. Although the Fed has only raised interest rates once so far, the yield curve indicates that a lot of future rate hikes are being priced in — and in fact, the number of hikes would have to extend into 2024 for that to make sense.

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Another indicator is the real level inflation affect the economy. Due to higher commodity prices, Schwab analysts expect inflation to remain elevated through the end of the year, when levels will fall again in response to the Federal Reserve’s changing policy. It appears that the economy is already cooling down, as higher interest rates have reduced demand for housing and expenditures on capital goods.

Longest Bond Duration

Longest Bond Duration

As a result, retired savers should not worry too much about inflation affecting fixed income investments in the medium term.

Analysts Charles Schwab said, “Inflation expectations appear reasonably contained. Markets rule out higher inflation rates in the near term, but … a tough tightening cycle [by the Fed] It’s going to drag her down in the long run.”

Although expectations for short-term inflation are at their highest level since 1981, long-term inflation is expected to remain near 3%, a long-term average going back to the 1990s.

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How retirement savers can benefit

As the market reacts to higher interest rates and inflation levels expected over the next year, Charles Schwab maintains that the outlook for medium to long-term bonds is positive. Signals from the yield curve suggest peak yields may be approaching, supporting the recommendation to buy long-term bonds. The company acknowledges that there may remain some pricing risk if high levels of inflation persist, but the likelihood appears slim given the Fed’s readiness to tighten monetary policy.

Investors can buy medium and long-term bonds through Bond funds, which offer higher yields for longer bond terms. Higher yields also carry greater interest rate risk, however, are caused by movements in interest rates and inflation levels. What assets are most suitable for you depends on your risk tolerance and investment strategy.

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Longest Bond Duration

Longest Bond Duration

Investment firm Charles Schwab has found that now might be a good time to add long-term bonds to your fixed income portfolio. The combination of rising bond yields and planned hikes in interest rates indicates a relatively useful entry point for investing in medium- and long-term bonds, which can help investors boost their retirement savings and income over time.

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Retirement planning tips

  • Not sure if investing in bonds will help you create a low-risk retirement portfolio? For a solid, long-term financial plan, consider speaking with a qualified financial advisor. Free SmartAsset أداة It matches you with up to three financial advisors who serve your area, and you can interview your own advisors at no cost to determine which one is right for you. If you are ready to find a counselor who can help you achieve your financial goals, let’s start.

  • Use SmartAsset for free retirement calculator To get a good initial estimate of How much money will you need for retirement.

Image credit: © iStock.com / BrianAJackson, © iStock.com / Torsten Asmus, © iStock.com / BraunS

the post Charles Schwab says it’s time to add this asset to your retirement portfolio first appeared SmartAsset . Blog.


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Your wallet is drained by subscriptions. Wall Street thank you.

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Try to calculate the number of subscriptions you have. We’ll wait.

There’s your Amazon Prime and your Spotify — the ones you married. How about that Apple TV+ subscription you’ve been meaning to cancel since you watched Ted Lasso… last summer? Scroll through your cellphone (it’s the same as another subscription) and you might find a Calm app your doctor recommended that you haven’t actually used, or a dating app you’ve used and hated, but will likely use again. There is a Chewy subscription to feed your dog DoorDash Subscribe to Feed Yourself and sign up for Peloton to work on the food you just ate. And of course, there’s also a Wall Street Journal subscription necessary to read this article.

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Norway’s $1.3 trillion wealth fund encourages traders to bet against the market

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(Bloomberg) — Nikolai Tangen, head of Norway’s $1.3 trillion sovereign wealth fund, wants traders to bet against the market.

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The world’s largest single owner of publicly traded companies, with nearly 1.3% of all listed shares, on Thursday outlined a three-year plan to limit losses that have accumulated in turbulent markets for 2022, exacerbated by soaring inflation and rising interest rates. and war in Europe. For the first time in its history, the wealth fund is looking forward to a future in which investments are a fraction of what they used to see.

This means that “excessive returns are more important than ever,” said Tangen, who has repeatedly told his countrymen to prepare for “extremely low returns.”

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Speaking in an interview Thursday, Tangen said the key to beating the benchmark would be to “push the fund to become more long-term, more ambivalent, and more active in terms of passive selection.” That is, “there are a lot of things we don’t want to own,” he said, without elaborating.

Built from the wealth of the North Sea in oil and gas, the Oslo-based fund has warned of a prolonged downturn in the markets after posting an average return of 6% over a quarter century of its existence. It lost 4.4% in the third quarter, which is equivalent to about $43 billion.

The fund has only one owner, unlike other large asset managers, is largely affiliated with the index, and invests according to a strict mandate from the Ministry of Finance. She strives to make the most of her limited field to try and beat the standard against which she is measured, something she has been able to achieve in eight of the past ten years.

“In a volatile world, you need to be more long-term and more ambivalent,” Tangen said. This is “because there will be more opportunities when you can do the opposite with everyone else.”

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He said the strategy was “playing into heightened geopolitical uncertainty” and a partial reversal of globalization, while the wealth fund released its three-year strategy. The plan sets goals such as investing in companies before they go public, voting more actively at shareholder meetings, improving cooperation between traders and portfolio managers, and exploiting periods of turmoil in real estate markets.

The fund also needs to be “more robust operationally,” Tangen said, including being prepared to counter cyberattacks. He has already said that openness and transparency are priorities to ensure that Norwegians understand why their rain fund is not growing as quickly as before.

The fund scaled back its participation in initial public offerings last year. In hindsight, he dodged a bullet, Tangen said, having bought fewer IPOs in “really frothy” markets and seeing those IPOs perform “really badly.” But that is likely to change as conditions improve.

“Selectively exploring this opportunity in the next strategy period is something we will look at,” said Equity CEO Pedro Furtado Reis. “Doing this allows us to get into the life cycle of the company earlier and hopefully as the company grows it will have a greater share of that value.”

The fund said it would consider investments in renewable energy storage and transmission in the future, which would expand the range of renewable infrastructure it would like to keep. It spent about 1.4 billion euros ($1.5 billion) on a 50% stake in a Dutch offshore wind farm in 2021, but has not added anything else to its renewable energy infrastructure portfolio.

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“It’s competitive,” Tangen said of the wind and solar projects market. “There aren’t a lot of projects out there, they’re very competitive and the returns are very low. So we just want to increase the space. Generally in the investment world, the more options you have, the better.”

The broader scope in renewables also reflects an internal effort within the fund to improve collaboration between teams and identify new investment opportunities, said Daniel Baltazar, chief equity officer.

“We may have built a few more silos than we should have,” Balthazar said. “With the advent of Nikolai, there is a much greater effort to collaborate between teams. With this collaboration between teams, we can also search in a better way across value chains.”

(Updates in detail in sixth paragraph, comments with CEO in twelfth)

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Saudi Arabia signs Huawei agreement, deepening ties with China on Xi’s visit by Reuters

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© Reuters. Chinese President Xi Jinping arrives in Riyadh, Saudi Arabia, December 7, 2022. Saudi Press Agency/Handout via Reuters

By Aziz El Yacoubi and Eduardo Baptista

RIYADH (Reuters) – Saudi Arabia and China offered deep ties with a series of strategic deals on Thursday during a visit by President Xi Jinping, including one with tech giant Huawei, whose growing incursion into the Gulf region has raised US security concerns.

King Salman signed a “comprehensive strategic partnership agreement” with Xi, which has received a warm welcome in a country that has forged new global partnerships outside the West.

Xi’s car was escorted to the king’s palace by members of the Saudi Royal Guard riding Arabian horses and carrying the Chinese and Saudi flags, and he later attended a welcome banquet.

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The Chinese leader held talks with Crown Prince Mohammed bin Salman, the de facto ruler of the oil giant, who greeted him with a warm smile. Xi ushered in a “new era” in Arab relations.

The offer stood in stark contrast to the quiet welcome given in July to US President Joe Biden, with whom relations have been strained by Saudi energy policy and the 2018 killing of Jamal Khashoggi that overshadowed the embarrassing visit.

The United States, which has warily watched China’s growing influence and its relations with Riyadh at rock bottom, said Xi’s trip is an example of Chinese attempts to exert influence around the world and will not change US policy toward the Middle East.

A memorandum was agreed with the Chinese company, Huawei Technologies, regarding cloud computing and building high-tech complexes in Saudi cities, despite the US discomfort with Gulf allies over potential security risks in using the Chinese company’s technology. Huawei has participated in building 5G networks in most of the Gulf countries despite the concerns of the United States.

Prince Mohammed, who fists instead of shaking hands with Biden in July, returned to the world stage after Khashoggi’s killing and has been defiant in the face of American anger over oil supplies and pressure from Washington to help isolate Russia.

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In a further polishing of his international credentials, Saudi Arabia and the United Arab Emirates said on Thursday that the emir and the Emirati president had led a joint mediation effort to secure the release of American basketball star Brittney Griner in a prisoner exchange deal with Russia.

In an opinion piece published in Saudi media, Xi said he was on a “pioneering journey” to “open a new era of China’s relations with the Arab world, the Arab Gulf states and Saudi Arabia.”

Xi added that China and Arab countries “will continue to raise the banner of non-interference in internal affairs.”

China’s state broadcaster CCTV said that sentiment was echoed by the crown prince, who said his country opposed any “interference in China’s internal affairs in the name of human rights”.

Xi, who is set to meet other Gulf oil producers and attend a broader meeting of Arab leaders on Friday, said China will work to make those summits “landmark events in the history of China-Arab relations,” and that Beijing regards Riyadh as “an important force in the multipolar world.” .

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Saudi Arabia and other Gulf states such as the United Arab Emirates have said that they will not pick sides among the world powers and that they are diversifying partners to serve national economic and security interests.

“reliable partner”

China, the world’s largest energy consumer, is a major trading partner of the Gulf states, and bilateral ties have expanded as the region pushes for economic diversification, raising US concerns about China’s participation in sensitive Gulf infrastructure.

The Saudi energy minister said on Wednesday that Riyadh will remain a “reliable and reliable” energy partner of Beijing and that the two countries will enhance cooperation in energy supply chains by setting up a regional hub in the kingdom for Chinese factories.

The Saudi Press Agency reported that Chinese and Saudi companies also signed 34 deals to invest in green energy, information technology, cloud services, transportation, construction and other sectors. It did not give figures, but said earlier that the two countries would conclude initial deals worth $30 billion.

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Tang Tianbo, a specialist on Middle East affairs at the China Institute of Contemporary International Relations — a think tank affiliated with the Chinese government — said the visit will lead to further expansion of energy cooperation.

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