Safe Places to Invest Your Money in a Bad Economy

November 26, 2008

The stock market has seen huge losses and the economy is stumbling around like a drunken sailor, trying not to collapse; where should you put your money (other than under your mattress)?

US News has a recent article on the best places for your money during these tough economic times where they look at five different financial vehicles you can use to keep your money relatively safe and still earning a return on investment.

Money Market Bank Accounts

We have some money in a Vangaurd money market fund but according to the article, bank money market accounts are the place to be now.

“Bank money market accounts not only trump what the best money funds are paying in terms of returns, but they also offer the protection of Federal Deposit Insurance Corp. insurance and supply needed liquidity access to the money”

Certificates of Deposit

I haven’t been a big investor in CD’s in the past.  We used one to get a secured loan to help build credit for my wife years ago but I’ve started looking into them again recently.  Here’s what the article says about CD’s.

“Commit to a five-year CD, and you’re looking at a 5 percent return. But remember, yields on longer-term CDs are more attractive because you risk the possibility that interest rates will rise during that time. CDs offer risk-free FDIC protection.”

High Yield Online Savings Accounts.

The article lists the benefits of high yield savings accounts as:

  • Low overhead translates to more competitive rates
  • Convenienent 24-hour-a-day access
  • Online savings banks are FDIC insured

We use ING Direct and recently opened an account with FNBO Direct. Read more about why I really like FNBO in my FNBO Direct review.

Bond ETFs

Bonds are one of the places the article lists as an option to stash your cash, they recommend “playing it safe with treasury ETFs for now.”  An example is the iShares Lehman 1-3 Year Treasury ETF (SHY).  Not 100% safe but petty stable as the article explains “It’s not federally insured, but because its holdings are backed by the U.S. government.”

Municipal Bond Funds

The article reccomends municipal bonds especially for people in higher tax brackets:

“investors get the benefit of tax-free income, less volatility than corporate bonds, and theoretically more safety”

Here are some of the funds that US News references:

  • Vanguard’s Short-Term Tax Exempt fund (VWSTX)
  • Intermediate-Term Tax Exempt fund (VWITX)
  • iShares S&P National Municipal Bond fund (MUB)

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Ben

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Ben
Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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