Q: With interest rates so low, I figure they will probably rise in the years ahead. Is that good or bad? – P.D., Green Bay, Wis.

A: High interest rates are great for savers, as bank accounts and certificates of deposit (CDs), among other things, will offer more interest. Annuities bought when rates are high will pay out more, too. Freshly minted bonds will offer higher interest rates – but bond funds, and those looking to sell existing bonds with older, lower interest rates, will take a hit.

Meanwhile, higher interest rates can hurt interest-sensitive sectors of the economy. The price of gold often falls when interest rates rise, for example. Real estate is especially affected: When rates are high, homebuyers (even those with high credit scores) will face steeper mortgage payments and may have to buy lower-cost homes -- or may end up deferring purchases. Sellers might have to reduce their asking prices to make their homes more affordable for prospective buyers. Those with adjustable-rate mortgages (ARMs) will see their mortgage payments gradually increase.

Q: What happens if my brokerage goes out of business? – W.H., Dunkirk, N.Y.

A: Most brokerages are covered by the Securities Investor Protection Corp. (SIPC), which protects your account for up to $500,000 in securities and cash, including up to $250,000 in cash. (Some also carry additional insurance.) You'll be protected if your brokerage fails – but not if your investments simply fall in value or if, for example, a company in which you own stock goes bankrupt. Be sure your brokerage is SIPC-protected by checking SIPC's list of members. Or just call and ask the brokerage.

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Learn more about good brokerages at our site, TheAscent.com, and more about the SIPC at SIPC.org.

Fool's school

Make the most of your 401(k): Most of us need to save and invest a lot to amass hefty safety cushions for our retirement. If your employer offers a 401(k) plan, it can be a great retirement-saving tool for you. Here are some tips:

  • Start participating as soon as you can, and contribute money aggressively. The more you save and invest, the more your account can grow. For 2021, the maximum contribution is $19,500. Those 50 or older can contribute an additional $6,500.
  • Consider opting for a Roth 401(k) account, if your employer offers it. Much like a Roth IRA, it will take your money on a post-tax basis, offering no upfront tax break. In exchange, though, withdrawals in retirement can be tax-free.
  • If your employer matches your contributions, contribute at least enough to max that out – because it's free money. For example, if your employer will add $3,000 to a $6,000 contribution you make, you've just earned an instant risk-free 50% return!
  • Understand that over long periods, it's hard to beat stocks for wealth-building. But many 401(k) accounts automatically invest your money, by default, in slower-growing, conservative investments. Consider setting your account to invest much or all of your money in stocks – especially if retirement is many years away.
  • Low-fee index funds are great stock investments. If your 401(k) plan doesn't include an index fund based on the S&P 500 or the broader U.S. or global stock market, ask if one can be added.
  • For maximum growth, plan to leave your money in your account for as long as possible. If you leave that job, you might roll that money into your new employer's 401(k) or into an IRA. Don't borrow from your 401(k) unless it's really an emergency.

Take action now, and your retirement may be much more comfortable. For practical guidance about 401(k)s and retirement in general, along with model portfolios featuring recommended funds, check out our "Rule Your Retirement" service at Fool.com/services.

My smartest investment

Fun in the market: One of my smartest investments was buying into medical cannabis company Tilray and tripling my investment. I also bought Disney at $35 and am still holding. I bought Amazon.com at $800 per share and sold when it was near $2,000. I bought into Juno Therapeutics before it was acquired by Celgene, too – there are so many more. It's been a fun couple of years in the market. – M.P., online

The Fool responds: You point out something about investing that many people don't realize: It can be fun!

Buying into promising companies and watching, hoping they'll rise in value, is a bit like cheering for your favorite sports teams. It helps when the stocks perform as hoped, of course – and watching your portfolio swell in value can be very exciting. Just understand that building a big nest egg for retirement is a long game, and that the stock market will rise for some periods and fall for others – but over the long run it has always gone up.

Interestingly, Tilray and fellow cannabis producer Aphria announced in late 2020 that they would be merging, creating the world's largest cannabis company (based on revenue). And Celgene, which bought Juno, was itself acquired by Bristol-Myers Squibb in 2019. Watching business mergers and spinoffs can also be exciting when companies in which you're invested are involved.

Foolish trivia

Name that company: I trace my roots back to 1933, when a Middle Eastern country permitted Standard Oil of California (Socal) to explore for oil. I started producing oil in 1938, and by the 1940s, I was known as the Arabian American Oil Co. By 1980, Texaco, Mobil, Exxon and Socal had sold their entire stakes in me to my local government. In 2019, I went public, selling shares of myself for the first time and becoming the world's most valuable company, with a market value of almost $2 trillion. At that time, it was the largest initial public offering (IPO) ever. Who am I?

Last week's trivia answer: I was founded by Thomas Edison in 1889. My research lab created the tungsten filament in 1908. I developed moldable plastic in 1930 and built the first U.S. jet engine in 1942. My wind-turbine business dates back to my purchase of Enron's wind assets. Today, with a market value recently over $97 billion, I'm a multinational conglomerate, focused primarily on power, renewable energy, aviation and health care. I boast an installed base of more than 7,700 gas turbines, 45,000 onshore wind turbines and 64,000 commercial and military aircraft engines. As 2020 began, I employed around 205,000 people. Who am I? (Answer: General Electric)

The Motley Fool Take

Up with smoke: You want cheap? How about Marlboro cigarette maker Altria Group (NYSE: MO), with its stock recently down more than 47% from a 2017 peak? A falling stock price will increase a stock's dividend yield, and Altria's payout was recently yielding a whopping 8.3%.

If you don't mind profiting from tobacco (or cannabis or alcohol), Altria offers a generous income stream that's likely to be increased over time.

The tobacco industry is facing more challenges than ever and isn't the growth industry it once was, but tobacco giants like Altria still have ways to reward their shareholders.

Increasing the price of tobacco products is unlikely to make smokers reduce their consumption. This gives tobacco companies considerable pricing power. Indeed, a government index of the price of tobacco and smoking products more than tripled from 2000 through late 2020. That's an average annual inflation rate of roughly 6%.

Meanwhile, Altria is exploring ways to broaden its appeal with smokeless products; for instance, it's introducing the IQOS heated tobacco system into some U.S. markets. It also invested $1.8 billion in licensed Canadian cannabis producer Cronos Group in 2018. Although the Canadian marijuana industry has been struggling under the weight of regulatory issues and company-specific miscues, it's expected that Altria will eventually aid Cronos in developing and marketing cannabis vape products.

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