Prospering in a low interest rate environment

Janet Yellen, Chair of the Federal Reserve from 2014 to 2018

The first of the six habits of Monday Morning Millionaires is to have a disciplined savings approach starting early in life. Without it, the other five don’t matter.

What do the current, near-zero interest rates do for savers? Adjusted for inflation, savers are losing purchasing power.

On the other hand, near-zero interest rates give us a stock market that is at an all-time high, — euphoria for investors.

In order to save, savers have been frugal, lived within their means, spending less than they earned, deferring gratification and behaving in a generally admired way. Their reward for more than a decade now?  The new normal has crushed them.

Former Fed chief Janet Yellen does not think that it will get better for savers anytime soon.

The new normal, painful for virtuous behavior, shows the beauty of the Monday Morning Millionaire Program philosophy. While each member’s asset allocation is personally unique, each member’s asset allocation has a large percentage of the portfolio invested in the market.

Historically, a 50/50, market/near-cash asset allocation has equalled the market with only half the risk. Savers would be way ahead if they joined the Monday Morning Millionaire Program. It has had a 15.5 percent annual return since 2012 during which time savers earned near zero percent.

This difference is the primary cause of the disturbing increasing wealth inequality.

While there is nothing that we can do about the wealth inequality we can make sure that we are on the right side of the situation by practising the habits of the Monday Morning Millionaire Program.

Please note that the Monday Morning Millionaire Program contains opinions only. It does not provide any investment advice or endorsements.

With fewer than 400 words, members can read this blog in less than five minutes. Following and studying the links embedded in the blog could take half a day. How you manage this blog depends on your level of investing knowledge. Your choice!

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Dr. Milan Somborac

The Monday Morning Millionaire Program supports do-it-yourself (DIY) investors which I have been for over 50 years. About my team and me

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