Investing in bonds feels like swimming against a powerful tide these days. Yields have risen sharply since Election Day, pushing bond prices down. The dynamic has made it tough to earn a positive return in high-grade bonds, which may suffer additional price declines.
The problem is that a long era of ultralow interest rates appears to have ended. The Federal Reserve has started raising short-term rates, and it is winding down its program of buying government bonds to help prop up prices (and keep yields down). Donald Trump’s election as president, meanwhile, has revived the prospect of stronger economic growth and inflation, which would erode the value of bonds and their fixed-income payments. Already, the yield of the benchmark 10-year Treasury note has climbed from 1.8% before Election Day to 2.4% today, a huge spike in a brief span. Kiplinger forecasts that 10-year Treasury yields will be at 3% by year-end. That almost certainly means more pain ahead for holders of high-quality bonds. “We’re concerned that rates will continue to rise and returns on bonds will be low to negative,” says Laird Landmann, codirector of fixed income at TCW, which runs TCW and Met West bond funds.
Higher yields do grant one big benefit: They put more cash in your pocket from interest income. If you own short-term debt, the bonds’ prices shouldn’t fall much if rates rise modestly. And you can reinvest cash proceeds from bonds maturing in a year or two, pocketing higher market rates relatively soon. But it could take many years to recoup losses in long-term bonds if rates keep ascending. For example, if long-term interest rates were to rise by one percentage point, the price of a 30-year Treasury bond would likely decline by 20%, wiping out more than six years’ worth of interest payments.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
So how do you invest for income in this climate? Limit your risk of losses from higher rates and spread your bets. Corporate bonds and mortgage-backed securities yield more than Treasuries and are less sensitive to rate swings, for instance. Also appealing are some high-yielding stocks, such as real estate investment trusts and energy pipeline firms, as well as closed-end funds, many of which yield upward of 7%. Of course, several of these investments come with an elevated risk of a credit-rating downgrade or default. But layering them atop a foundation of high-quality bonds and cash can help steady your portfolio if markets head south.
Here are 29 income ideas to scoop up yields from 1% to 10%. All prices, yields and related data are as of March 31.
-
Donating Complex Assets Doesn't Have to Be ComplicatedIf you're looking to donate less-conventional assets but don't know where to start, this charity executive has answers, such as considering a donor-advised fund (DAF) for its tax benefits and ease of use.
-
Travel trends you can expect this summerThe Kiplinger Letter Domestic trips will trump foreign travel amid economic uncertainties, though some costs are down.
-
457 Plan Contribution Limits for 2025Retirement plans There are higher 457 plan contribution limits for state and local government workers in 2025. That's good news for state and local government employees.
-
Medicare Basics: 12 Things You Need to KnowMedicare There's Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare — and much more.
-
The Seven Worst Assets to Leave Your Kids or Grandkidsinheritance Leaving these assets to your loved ones may be more trouble than it’s worth. Here's how to avoid adding to their grief after you're gone.
-
SEP IRA Contribution Limits for 2025SEP IRA A good option for small business owners, SEP IRAs allow individual annual contributions of as much as $70,000 in 2025, up from $69,000 in 2024.
-
Roth IRA Contribution Limits for 2025Roth IRAs Roth IRA contribution limits have gone up. Here's what you need to know.
-
SIMPLE IRA Contribution Limits for 2025simple IRA The SIMPLE IRA contribution limit increased by $500 for 2025. Workers at small businesses can contribute up to $16,500 or $20,000 if 50 or over and $21,750 if 60-63.
-
457 Contribution Limits for 2024
retirement plans State and local government workers can contribute more to their 457 plans in 2024 than in 2023.
-
Roth 401(k) Contribution Limits for 2025retirement plans The Roth 401(k) contribution limit for 2025 increased, and workers who are 50 and older can save even more.
