High Yield Safe Investments - Protection First, Returns Next
High Yield Safe Investments may seen contradictory given how low interest rates are these days. However, with the right approach, savvy investors can ensure that their principal is protected while deriving income at the same time. Although inflation is tame right now, with the Fed printing money and the administration running deficits, it's only a matter of time until inflation picks up again. With that in mind, it's important to strike a balance between risk, return, time horizon and asset class.
Consider the following priorities:
What is your time horizon?
If the funds are being set aside for a rainy day fund but you don't actually know when you'll need the money, you'll probably want those funds set aside in a more liquid account, but you'll have to sacrifice some return in exchange for immediate access.
What are the funds for?
Home Purchase? Emergency Fund? Long term savings? A gift for a grandchild? These factors may also dictate which type of asset class you want to pursue.
How Much Risk Are You Willing to Assume?
Since returns are generally inversely correlated with risk, depending on the type and magnitude of risk you're willing to assume, that may dictate your asset class. It is generally recommended that for High Yield Safe Investments, a requirement is FDIC insurance from the issuing institution. Regardless of how you view the soundness and solvency of an institution, bankruptcy or financial malfeasance may be just around the corner. For instance, investors in Stanford CDs learned the hard way that CDs yielding 8% weren't to be trusted. Additionally, investors in Advanta's high yield investment notes that weren't FDIC insured lost a substantial portion of their investment to be determined by the bankruptcy courts.
What Kind of Relationship Do You Prefer with the Institution?
Some people like to know their banker and work with them face to face in their local community. That type of relationship may be comforting on one level, but have an opportunity cost simultaneously. Generally, online banks and investment firms can provide for higher returns and lower transaction costs due to the efficiency of their businesses. The lack of overhead and brick and mortar locations allows them to be more competitive than a typical local institution. Online transactions are generally considered to be very secure these days as well.
Upon considering those questions, then visit the following options for High Yield Safe Investments to see which one is right for you:
High Yield CDs
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