Dividends4Life: Investments To Endure 3 More Years Of Low Rates

Risk-averse investors, prepare to be disappointed a good while longer. Expect interest rates to remain low at least three more years, with investments earning very little unless you're willing to accept plenty of risk. Money-market mutual funds are likely to continue paying barely above zero, with 10-year U.S. Treasurys yielding less than 2 percent. That's the outlook after the Federal Reserve's latest move to stimulate the economy by prodding Americans to spend and borrow more, and invest in stocks again. The program announced last week has been dubbed QE3 _ a third round of what economists call quantitative easing, aimed at helping a slow recovery gain momentum.

Invest in dividend-paying stocks or funds that specialize in them, and you can expect steady income, along with potential gains from rising stock prices. Dividend-payers tend to rise more slowly during market rallies, but suffer smaller losses when stocks decline. So if a market downturn is around the corner, dividends will offer some protection. Just remember that companies often cut dividends when the economy skids, as they did in large numbers to conserve cash after the 2008 market meltdown. Still, many investors are finding the potential returns and income worth the risks. Investors deposited a net $22.5 billion into dividend-stock funds _ usually labeled `equity income' funds _ over the 12-month period through August, according to Strategic Insight. During that period, a net total of $114 billion was withdrawn from all other stock fund categories.

Source: WTOP

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