Anytime government issues overwhelm business news for as long as the debt ceiling crisis has, protecting your money should be a concern. Washington says that they have the votes to push the debt deal through. The deal would take the worst case scenario, debt default off the table. But until it happens everything is in limbo (at the time of this writing the debt ceiling vote hadn’t happened).
Throughout this debt debacle, several economic indicators have been released showing signs of a slowing economy. The current debt deal will only limit the governments ability to further additional economic growth. Which leaves the economy’s savior to jobs. If only the powers that be in Washington can find a way to agree on spurring job growth. Which is highly doubtful after watching their total lack of cooperation with the debt deal.
Until job hiring improves, and we shouldn’t expect significant changes for at least a year or more, we can expect slow economic growth through the November 2012 elections. So the big question is where should you be investing your money? With a timeline of 12-18 months, safety is the quick answer.
The 3% Plus Dividend Yield
The goal here is getting a better return on your money than you would in treasury bonds. The 10-year treasury bond is sitting at less than a 3% yield. You’re not risking much by investing in a stock, mutual fund, or ETF that has a dividend yield of 3% or more. Reinvest those dividends and compounding returns will only help the cause.
Look for high quality, large cap companies that may not need a strong economy to grow. Utilities, energy, particularly oil and gas, agriculture and food manufacturers are a few industries that should perform well.
Another way to look at, if you had to cut back on your monthly spending, which products or services would you absolutely not stop paying for. Those are companies you want to invest in over the next year.
The Case for Gold
Gold has been a regularly touted investment option. It’s up about 30% over the past year. Which may sway some to avoid it as an investment. But as long as the economy is slowing, future inflation is still possible, and debt is an issue in the US and Europe, gold will be one of the best safe haven plays available.
There are a few ways to invest in gold, but for most the best and easiest is through the SPDR Gold Trust ETF (GLD). This is a riskier investment than the defensive dividend stocks. Gold could drop in value with any sign of improving economic data, or a stronger dollar. Start with a small position if this is your investment of choice.
Making the most out of a bad situation is the name of the game. A diversified portfolio of high quality dividend stocks is the best way to protect yourself from a slowing economy and the inefficiency of Washington.