With all of the propaganda about Wall Street being ‘too big to fail’, and the obvious instability attached to the stock market – with stocks diving on a regular basis, it makes you wonder where to invest your hard earned money and retirement funds that is still a safe and secure place. Who can you trust in this failing market, and where can you make a little interest without losing your entire investment?
So many people have lost their entire savings in this market turmoil. But, remember that most of those people had high-risk, high interest funds, which as tempting as they may be – are not a good investment right now. A lot of other people who invested wisely are safe and still building their retirement funds.
There are still a few options available that offer minimal risk.
Open Money Market Accounts
Money market accounts are generally very safe, because established banks offer them and your money will be FDIC insured up to a certain amount, which guarantees that your deposit will be repaid should the market fail, or the bank fails. FDIC is Federal Deposit Insurance Corporation and going to their website at FDIC will answer most of your questions about money market accounts and FDIC insurance.
The bank actually uses your money to invest in short-term stocks and bonds that are solid and low risk.
Money markets offer available cash when you need it, without penalty of withdrawal, and can offer from .5 percent to up to 4 percent interest on your deposit/investment. The bank actually uses your money to invest in short-term stocks and bonds that are solid and low risk. Some banks though, require a minimum deposit and minimum balance to earn the higher interest rates.
High Interest Savings
Even though banks don’t offer much incentive in the way of interest rates on savings accounts, they are FDIC insured and stable. Checking around to the high-end banks might help find something a bit more attractive, however, they are not huge investment incentives. Another benefit of high-interest savings is liquidity, and that comes in handy when you’re facing an emergency and need readily available cash.
Certificates of Deposit
Certificates of deposit (CD’s) are offered by banks, or a broker and are safe, because they are also FDIC insured. These long-term investments have attractive interest rates depending upon the amount you invest, and the term you choose. Some CD’s ask for a five-year commitment, for the higher rates, and withdrawing early could cost you in penalties and interest charges. The rates at vary between 2 percent and 4 percent, however different banks offer different rates, so check with the major banks before investing.
Treasuries are also known as T-bills and are government issued, and considered very low risk investments, and the safest investment in the world If you’re concerned about the economy, T-bills are your best bet, and when you buy these treasury bonds, the interest rate locks in throughout the investment, whether it be short term, with a maturity date of 13 weeks, or longer term, with a maturity date of 26 weeks. But, safety means low interest income. Check around to find the best rates.
There are different types of mutual funds available, and choosing the low risk funds are advisable in this market. Mutual funds are stocks, grouped together, that are safe and proven, and offer very low risk. Some are higher risk, which offer higher interest rate returns, but the rates on the low risk funds are better than T-bills and CD’s. However, you need to use a fund manager, and pay administrative fees for the management of your fund.
These are nearly risk-free, but offer a very low interest return on your investment. They are offered at the larger banks and credit unions, and are insured by the U.S. treasury department. They are money that the government uses and in return, they pay you minimal interest for using that money. The interest rates fluctuate depending on the economy, so check around to find the best rates.
The best part of these employer offered plans is that you can invest in them without paying taxes on the money invested. Most corporations and large businesses offer them, and they are relatively safe. When you sign up to invest in a 401k, you are able to choose the funds your plan invests in, and depending on the risk you are willing to take, the interest rate return will reflect the risk. Both riskier funds and safe funds are available, and if your employer offers 401k plans, it would be a wise investment.
Of all of the investment opportunities available to you, make sure you read the fine print in each investment opportunity because doing so could save you money in the long run. Staying close to FDIC insured funds are probably best in this economy, and even though the interest rate of return won’t be optimal, your money will remain safe until this crisis is over. Best to be ‘safe than sorry’ and wait until things get a little more stable before taking risks.