3 Places NOT to Put Money Now

Better Investing

What's Hot

2 Types of Black Marks Might Vanish From Your Credit File SoonBorrow

6 Ways the Obamacare Overhaul Might Impact Your WalletInsurance

7 Dumb and Costly Moves Homebuyers MakeBorrow

This Free Software Brings Old Laptops Back to LifeMore

Obamacare Replacement Plan Gets ‘F’ Rating from Consumer ReportsFamily

Beware These 12 Common Money MistakesCredit & Debt

21 Restaurants Offering Free Food Right NowSaving Money

17 Ways to Have More Fun for Less MoneySave

House Hunters: Beware of These 6 Mortgage MistakesBorrow

30 Household Uses for Baby OilSave

25 Ways to Spend Less on FoodMore

Nearly Half of Heart-Related Deaths Linked to These 10 Foods and IngredientsFamily

5 Surprising Benefits of Exercising Outdoors in WinterFamily

10 Ways to Save When You’re Making Minimum WageSave

Boost Your Credit Score Fast With These 7 MovesCredit & Debt

7 Painless Ways to Pay Off Your Mortgage Years EarlierBorrow

The Most Sinful City in the U.S. Is … (Hint: It’s Not Vegas)Family

The True Cost of Bad CreditCredit & Debt

10 Companies With the Best 401(k) PlansGrow

This Scam Now Tops ID Theft as the No. 2 Consumer ComplaintFamily

6 Stores With Awesome Reward ProgramsFamily

6 Ways to Save More at Lowe’s and The Home DepotSave

6 Healthful Treats for Your DogFamily

New Study Ranks the Best States in the U.S.Family

Thousands of Millionaires Moving to 1 Country — and Leaving AnotherGrow

Strapped for College Costs? How to Get the Most From FAFSABorrow

6 Overlooked Ways to Save at Chick-fil-AFamily

Ask Stacy: What’s the Fastest Way to Pay Off My Mortgage?Borrow

Where to Sell Your Stuff for Top DollarAround The House

8 Ways to Get a Good Price on a Shiny New AutoCars

Ask Stacy: How Do I Start Over?Credit & Debt

Secret Cell Plans: Savings Verizon, AT&T, T-Mobile and Sprint Don’t Want You to Know AboutFamily

30 Awesome Things to Do in RetirementCollege

14 Super Smart Ways to Save on TravelSave

The Rich Prefer Modest Cars — Should You Join Them?Cars

You’ll Soon Pay More to Shop at CostcoSave

10 Ways to Save When Your Teen Starts DrivingFamily

Got money in a long-term bond fund or a 5-year CD? If so, you and I have different views of where the U.S. economy is heading.

In the post 3 Places to Put Money Now, I suggested stocks and real estate as appropriate investments for an economy that’s starting to emerge from the woods.  The third suggestion — paying off debt — is always a great idea.

Now it’s time to see what investments you might want to stay away from.

Note, however, that behind these ideas is my belief that the economy is getting better: if you don’t agree and think that it’s getting worse, this is advice you’ll want to ignore.

Investment to Avoid: Long-term bonds

In the video new story above, I attempted to illustrate how bonds move in relation to long term interest rates by using a seesaw.  On one end you have interest rates, on the other bond prices. So when interest rates go up, bond prices go down, and vice-versa. The longer the term of the bonds – that is, the longer it will be until the bonds mature – the more pronounced the swings.

If the economy is truly picking up steam, then the path of least resistance for interest rates is up. That’s why I’m counseling to avoid long-term bonds and long-term bond mutual funds: because if interest rates go up, bonds could get hammered.

In a recent article called Stop gobbling up bonds — they’re risky!, Money Magazine agreed.  And so did this article from Forbes, saying in part…

Interest rates are at their lowest levels since the 1950s. Investors who grasp for that last percentage point of yield and buy long-term bonds are making a gigantic bet that rates will fall even further or at least hold even. Anything else will expose them to serious losses, as happened in the late 1970s. Long-term rates spiked past 13% by 1980, halving the value of some supposedly conservative bond portfolios.

So if you have a long-term bond mutual fund through your 401(k) or elsewhere, be aware of rising interest rates.  I’m not suggesting that rates will rise suddenly or severely. Major interest rate increases are still months – if not years – away.  Nor am I suggesting that you shouldn’t ever own bond funds: they can be appropriate for part of a conservative investment mix.  But bonds are investments that shine in falling rate environments: That’s probably behind us.

Investment to Avoid: Long term Certificates of Deposit

You avoid bonds when interest rates are rising because they can fall in value. You avoid long-term CDs because of opportunity cost.

If rates do begin to rise, the last thing you want is have all your money locked up in a long-term certificate of deposit that doesn’t allow you to take advantage of higher yields.  The time to lock in interest rates is when they’re peaking and expected to fall, not when they’re at historic lows and expected to rise.

That being said, there’s nothing wrong with spreading your savings around in various maturities, like money market accounts, short-term, and longer-term CDs.  Then you’re prepared no matter what happens to rates. If they rise, your money market immediately pays more. If they fall, you’ve got a higher rate locked in with long-term CDs.

Investment to Avoid: Gold

In a recent article called Gold is a bubble – resist its charms, CNN/Money makes the case that gold is over-priced and due for a fall. Gold has nearly tripled over the last five years – this is a party that could soon be winding down.

From that article…

“When the economy moves from recession to prosperity, there will be little reason to own gold,” says Mark T. Williams, who teaches risk management at Boston University. “And speculators will learn the hard way that gold in times of financial stability is hazardous to investor health.”

As I suggested in the video above, behind the speculative fever that’s driven gold to historic highs is a fear of runaway inflation, global economic Armageddon and other nightmare scenarios. As an improving world economy helps dissolve some of these fears, the need to own gold will decrease, and perhaps, so will prices.

I own some gold in my portfolio, and will probably continue to, at least for the near future. But gold is in a bubble: sooner or later the music will stop – don’t be the last one standing.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!


Read Next: 10 Key Facts to Test Your Credit Card IQ

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 2,058 more deals!