Safe Investments for Your Money

One day the DOW was up 275.56 points. That’s great, but the day before it closed down by 100.96 points. You may be looking for ways to hedge against the losses you may be taking from your stock market portfolio, and you have several options to choose from that will be extremely safe investments for your money.

Every investment comes with some risk, even government bonds as is evident looking at Europe now. Some investments are more risky than others and can be like gambling in the wrong hands. So consider some of the options in light of your own circumstances and take professional advise if you need to.

The Savings Account

Everyone is familiar with the savings account, and everyone knows that it’s one of the safest places you can invest your money. The entire thing will be insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC offers an insurance policy to your bank where deposits can be insured for up to $250,000. These banks pay premiums to the FDIC and if they experience a financial downturn, they will have the money they need to close out your account.

The Money Market Account

The money market account is also insured by the FDIC, meaning that it will be a very safe investment. The money market account is a form of savings account, but you would be lending the bank money that it uses to purchase government-backed and corporate-backed securities. You will receive a higher interest rate than you can with a regular savings account, but you will have to keep your balance at a particular level.

Certificates of Deposit (CD)

Certificates of deposit are insured by the FDIC, and will earn you an interest rate that will be higher than your average savings account. If you aren’t going to need the money for a while, a CD would be a good investment for parking extra cash because you can lock it away for a couple months or even 10 years. The money will always be in the account and will be allowed to grow because of the interest.

One way to take advantage of the CD is to create what is called a ladder. You can create a ladder by purchasing CDs that will mature at different times. For example, you might purchase a CD that will mature in one year, a second that matures in two years, a third that has a maturity date in three years, one that matures in four years and a fifth that matures in five years. With five different CDs, every year you will have a CD that is maturing and you can then decide to purchase a new CD that will be often subject to a higher interest rate. It’s a very safe way to keep moving your money around and know that you can never lose the principle; the interest rates normally increase unlike the stock market that has major ups and downs.

There are often special offers on CD rates available. You may be able to adjust your ladder to take advantage of these superior interest rates. These may be for an odd number of months, but it may be worth it to get that extra interest.

The Individual Retirement Account (IRA)

If you are looking for a safe place to save money for your retirement, the IRA is a great choice because it’s also FDIC insured. You can open this type of account on your own, and the deposits you make into it may be tax-deductible. They may also offer you a way to qualify for a lower tax bracket than you are currently in during your working years.

Government Savings Bonds

The “EE” savings bonds are highly safe investments, and they are worth double what you will pay for them. For example, if you were to purchase a savings bond for $25, its value is actually $50 and after it matures in 30 years, you receive $50 back rather than the $25 you paid for it. All the time that you will have these types of bonds, you will be earning the same set rate of interest each year because it’s guaranteed.

Another type of savings bond is the “I” bond. These bonds don’t have a guaranteed interest rate like the “EE” bonds because it will be altered every six months. They are a good investment for betting against the effects of inflation.  The interest rate is adjusted to take into account the effects of inflation. Make sure you check the minimum holding periods and interest rate penalties for early redemption.

The Treasury Bond

Another type of bond is the treasury bond. They also have a 30 year maturity date, but the interest rate on these $100 treasury bonds pays you every six months. The interest rate is relatively high on treasury bonds and it lasts for a guaranteed amount of time. At the moment, you might be able to earn a relatively high interest rate for these types of bonds.

The Treasury Bill

Treasury bills are safe, short-term investments that last a year at the most. When you decide to purchase a treasury bill, also known as the T-bill, you can purchase them for time periods lasting four weeks, 13 weeks, 26 weeks or a full year. When you purchase a T-bill through your bank’s or broker’s auction, you aren’t going to pay face value for it; the face value of a T-bill is $1,000, but you may be able to purchase it for $925. After it matures, you are guaranteed to receive $1,000 back.

Gold, Silver and Other Precious Metals

Depending on the time, you will either hear that gold is not a good investment or you will hear the complete opposite. Right now with the dollar losing value, most people consider gold to be a good and fairly safe investment. Gold has been increasing in value lately because people have been investing in it to hedge against the inflation that is caused by a devaluation of the dollar. These metals can be purchased as bars or coins and can be easily stored in your safe at home. If you think that the dollar will decline significantly then consider these metals as a hedge. Keep you eye on the worldwide demand though. The price of precious metals can be volatile so your return is not certain in the way a treasury bond is.

Real Estate

Everyone is well aware of the fact that there has been a housing bubble that burst which saw several people defaulting on their mortgages and walking away from their homes. These facts are true but at the present time, real estate is an investment to consider. The best time to buy an investment is often when no one wants it.

Some of the people who have found themselves in trouble were those who purchased properties for the purpose of selling them for a profit right away; the market had other plans for them. If you are expecting to hold onto your real estate investments for the long-term, real estate may be a suitable investment for you. After you wait at least 10 years for the market to come back, you may be able to receive a significant return for your patience.  If rental income can cover your property outgoings then you can generally hold property until the housing market rebounds. This can be a welcome position to be in.

These options for safe investing can be good ones for you if you are looking for someplace to hedge against any losses you may suffer in the volatile stock market. Some of them are short-term investments, but the long-term investments can offer you great rewards if you wait them out.

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