Short-term interest rates are hitting rock-bottom lows.
CD rates are at very low levels and do not keep up with inflation.
This article discusses several unique investments to keep pace with inflation and provide solid short-term returns, with as little risk as possible.
Anyone looking at fixed income investments at the current time know that interest rates are at very low levels. My favorite investment in the past has been preferred stocks. However, with some new perpetual preferreds being issued at rates less than 5%, it is time to look at some other alternatives. This article will look at a few of these options and is the sixth article in my Early Retirement series. We'll take a look at a few options to help investors obtain a higher return on their cash and short-term investments.
Investment Idea #1 - Duke Energy (NYSE:DUK) Premier Notes - currently 2.20% to 2.40%
- Duke Energy Premier Notes are a unique investment idea and interest rates are determined on a weekly basis.
- The notes are direct investments in debt obligations of Duke Energy. Under the program, Duke Energy borrows directly from investors by issuing notes. In return, investors receive a competitive floating rate of interest that is very favorable compared to other cash alternatives like bank accounts, short-term CDs and money market mutual funds.
- A minimum of $1,000 is required to open the account. Subsequent investments must be at least $50.
- The notes are not equivalent to a deposit or other bank account, and are not subject to the protection of Federal Deposit Insurance Corporation (FDIC) regulation or insurance, or any other insurance. The notes are direct investments in debt obligations of Duke Energy. However, as a regulated utility, the company has a very strong credit rating of single-A from Standard & Poor's.
- Rates on balances are 2.20% for investments less than $10,000 and 2.40% on amounts over $50,000. For investments between these amounts, the rate is 2.25%.
- Investors have check writing ability from this account, with no fees charged for checks greater than $250.
- A link with information about this investment opportunity can be found here.
Investment Idea #2 - Dominion Resources (NYSE:D) Reliability Investments (DERI) - currently 2.45% to 2.70%
- Appearing to be almost identical to the Duke Energy notes, the Dominion Energy Reliability Investment (DERI) is a program through which can make direct investments in new debt obligations of Dominion Energy. Under this program, Dominion Energy borrows directly from the investor in the form of demand notes. Investors receive a competitive floating rate of interest that may be higher than short-term CDs and money market funds. However, the credit rating of Dominion is slightly lower at BBB.
- Once again, a minimum investment of $1,000 is required. You can also write checks against this account, with no charge for checks over $250. There are no administrative or maintenance fees and your checkbooks are free.
- Current rates are 2.45% for accounts with less than $10,000. Accounts with more than $50,000 pay 2.70%. Rates are 2.55% for accounts between these amounts
- A link with more information about the DERI program can be found here.
Investment Idea #3 - the U-Haul (NASDAQ:UHAL) Investors Club - 3% on two year equipment loans
- The U-Haul Investors Club has been discussed in my prior articles, and a minimum of only $100 is needed to open up the account.
- Investments in UIC are backed by assets such as trucks, trailers, equipment and real estate of the parent company, Amerco (UHAL).
- Currently the program and interest rate of 3% on two-year notes that are secured by equipment - utility dollies.
- The downside of this investment is that your funds are locked up for the term of the loan. The investor, in effect, becomes the bank and quarterly payments of interest and principle are paid into your account.
- Additional information on this interesting program can be found here.
Investment Idea #4 - CoreCivic (NYSE:CXW) 5% corporate bonds due 10/15/2022
While many investors may prefer bond mutual funds, there are certain times when purchasing individual bonds makes economic sense. Please note that when investing in corporate bonds, they normally trade for $1,000 each and there is often a minimum purchase amount of 5 bonds. However, this bond can currently be purchased in increments of just 2 bonds. At the present time and with the current pricing level, this is one of my favorite corporate bonds.
- CoreCivic bonds (formerly Corrections Corp of America), 5.0% coupon, maturity date of 10/15/2022, rated Ba1/BB, CUSIP 22025YAQ3. Current pricing is $99.39 per FINRA, with a yield to maturity of slightly over 5%.
- The company is a national leader in corrections and detention management. While the private prison sector can be controversial for some investors, the bond matures in slightly less than three years.
Hopefully this sixth article in my series on early retirement has been educational and should provide ideas for additional research. For long-term investors, "Sitting in Cash is Trash" and I'm always looking to beat inflation. I encourage all investors to do additional research before investing in any of these ideas.
Disclosure: I am/we are long UIC AND CORECIVIC BONDS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Disclosure: I own investments in the U-Haul Investors Club (UIC) and CoreCivic bonds at the present time.