Let's be clear about one fact: "There is no such thing as a perfectly safe investment." There are, however, a number of good low risk investments available to investors -- which the industry loosely calls "safe investments" -- but none are completely risk free. So, please bear this in mind as you read on.
This article is dedicated to answering questions that I am regularly seeing from people wanting to know where they can find: "the best investments for today's economy". And they all involve the central themes of low risk, safety and asset security.
And who can blame them? The global economy is on tilt, largely being driven by the United States, the world's financial core. Stock markets are experiencing significant devaluations, financial institutions are defaulting left and right, the foreclosure market is rampant and the price of oil has plummeted from record highs. Sound like Armageddon?
What's an investor to do? What is the the safest place to invest money today? Is it possible to find HIGH YIELD safe investments anymore? Or, should I just keep my money in my mattress where it won't lose value? Oops! I forgot about inflation! Even in my mattress, I'm losing money!
For answers, please keep reading....
Things You'll Need
- An open mind
- Knowledge of your finances
- Access to your financial records
- Willingness to butt heads with your financial advisers
First off, I want to review some of the questions I am seeing from investors these days. I've boiled them down into two central themes:
What are the most secure, safe investments today?
- Where can I find legitimate HIGH YIELD safe investments today?
I'm guessing that you're probably asking one or both of these questions yourself. I know that I was! So, I've conducted a great deal of research on these two central themes.
Based upon this research, below is a list of what I consider to be the most secure, safe investments today. And, I've included my top picks for the best HIGH YIELD safe investments at the end.
THE MOST SECURE, SAFE INVESTMENTS TODAY:
First of all, there is no perfect list of safe investments that works for everyone. Factors such as age, income, portfolio size and diversification, IRA type (self directed vs. traditional), health, family situations, etc. all must be considered on an individual basis to do this properly. However, for the general population, here are my top picks (safest investments first):
We'll start the conversation about safe investments with the idea of putting your money in your mattress or burying it in a coffee can in your backyard (I know someone who still does this.) The risk here is three-fold: your money will lose value based on the inflation rate. (i.e. Assuming a 3% inflation rate, you'll lose 3 cents on every dollar each year.) Also, someone could steal the money from you or you could forget where you buried the coffee can!
I also include in the "Cash" category: FDIC-insured banking accounts including Checking and Savings Accounts, Certificates of Deposit and Money Market Deposit Accounts. These are considered by many to be the safest money investments you can make. However, you are limited to the amount insured by the FDIC (currently this has been raised to $250,000 per bank per individual through 2009.)
What risk is there associated with these?
First, is inflation risk. The rate of interest you'll earn on your money will probably not keep up with the rate of inflation, though it's a little better than doing nothing with your money.
Second: anyone every hear of the Great Depression? Well, that's what the FDIC was created to protect against, but you never know.
Now, Checking Accounts typically pay no or very low interest and assess a menu of fees which usually result in the average account not pacing with inflation. Savings Accounts usually average well below the inflation rate. Money Market deposit accounts pay a little more, but still below inflation and have limitations on the number of checks/withdrawals you can make (limited liquidity). And, even the best CD investments aren't much above current inflation rates, plus you'll need a very large amount of money to get the best rates and/or be willing to forgo access to that money for a number of years (no liquidity without penalty fees). Even then, the interest rate earned is not going to rock your world.
U.S. GOVERNMENT TREASURY BILLS, NOTES & BONDS:
Treasury Securities or 'Treasuries' are backed by the full faith and credit of the U.S. Government. These are broadly considered around the world to be arguably the safest money investments available and are exempt from state and local taxes. However, I rank them below Cash because I feel they are both equal in terms of asset security (both are backed by U.S. Government institutions), have generally less liquidity and typically pay less interest than Money Market Deposit Accounts or CD rates.
Treasury Bills mature in less than one year. Treasury Notes mature between 2-10 years. Treasury Bonds mature up to 30 years.
Downsides: Interest earned on Treasuries may not keep pace with inflation. You can usually get a better rate choosing among Money Market Deposit Accounts and the best CD investments (see #1 above). Also, liquidity is an issue depending on your choice of Treasury investment. And if you need your money before the security matures, you may not get back all of your original investment. Finally, it's important to understand that treasury security prices have an inverse relationship with interest rates. When one rises, the other one falls. So, if interest rates have gone up and you need to sell before the treasury maturity date, you'll get less than the entire principal amount back.
Note: There is a newer form of Treasury security now available that keeps up with inflation. It's called the "I-Bond" (Inflation Bond). Semiannually adjusts for inflation and sold in $50 to $10,000 denominations. You must hold for at least 1 year and pay a penalty of 3-months earnings if redeemed before 5 years.
Municipal Bonds or 'Munis' are issued by state and local governments to pay for new highways, build schools and other projects for the good of the public. They are backed by the full faith and credit of the state or local government and considered just a step down from U.S. Treasuries in terms of being among the most secure, safe investments available. These securities are exempt from federal taxation and in some cases, from state and local taxes as well, if you live in the municipality issuing the bond.
Downsides: Interest earned is usually quite low and you may have to pay a commission to buy them. Also, like a Treasury, if you redeem before the maturity date, you may not get all of your money back (not liquid).
U.S. TREASURY MONEY MARKET FUNDS:
These are Mutual Funds managed by financial institutions such as Fidelity Investments that pool investor funds to invest strictly in short-term U.S. Government Treasuries (see above). These securities can be traded, so are more liquid than Treasuries purchased directly from the U.S. Government. However, the share price and yield of the fund can fluctuate with interest rates and the timing of the securities bought and sold inside the fund. This means, there is some uncertainty about how much of your original investment you'll get back when you cash out, plus you'll have to pay an on-going expense to own the fund (called the "expense ratio) and you may have to pay a commission to buy and sell the fund securities (called a "load"). Also, there's always the risk associated with the fund manager's financial stability to consider these days. (Case in point: Merrill Lynch.)
NOTE: Unlike Money Market Deposit Accounts, this form of Money Market fund is NOT FDIC insured. (Very important!)
These are Mutual Funds managed by financial institutions that pool investor money to invest strictly in Aaa Rated Corporate Bonds (highest Moody's rating for financial stability). This security type is one of the safest money investments because it diversifies by investing in a combination of different Aaa rated corporations' bonds. Therefore, these are considered to have lower risk versus buying a singular Aaa Corporate Bond.
Downsides: Like U.S. Treasury Money Market Funds, these funds are susceptible to the mutual fund's share price and yield fluctuations based on interest rates for the different securities traded inside the fund. Also, you'll have to pay the "expense ratio" and "load" costs similar to U.S. Treasury Money Market Funds (see above).
Now we're going to address the 2nd group of questions about
THE BEST HIGH YIELD SAFE INVESTMENTS AVAILABLE TODAY:
A lot of people today have been stung by the current financial conditions, whether in stocks or otherwise. And, as a result, many are running for cover and seeking the safest investments they can find to shelter their assets until the economy turns around.
We're seeing many investors now moving their money into investments like cash and "treasuries" that aren't going to keep pace with inflation. And although they aren't happy about losing money with any investment, they are settling for losing a little versus losing a lot somewhere else (e.g. the stock market).
I too have taken a more conservative approach with my investment portfolio, but I want you to understand that you can still find high yield safe investments right now if you know where to look! That's the key: most people don't know where to look, so they're settling for break-even or money-losing investments, when they don't have to.
"You can still find asset security without having to settle for break-even or money-losing investments!"
Below, is important information about two of the most secure, high yield safe investments you can make today.
One is a very timely short-term investment that is expected to continue flourishing for the the next 2-3 years.
The other has been a cornerstone investment for many of the world's wealthiest investors for generations because it can deliver both asset security and superior yields. Best of all, it is expected to flourish for the next 25 years and I'm going to tell you exactly why, how and where this is happening!
These days, many people run away when they hear anything related to "real estate".
At the same time, if you ask people whether we are in a buyer's or seller's market for real estate -- most will correctly say BUYER'S MARKET. In other words, great deals can be found and sellers are motivated.
So, before YOU run away, you owe it to yourself AND your bank account to learn about two very timely forms of real estate investment that have the potential of making you rich!
- BEST HIGH YIELD SHORT-TERM INVESTMENTS:
For the next 2-3 years, I absolutely believe that foreclosure properties & bank-owned REO properties are the very best investments available to investors today. And I'm talking about across ALL investments -- these investments have the greatest wealth-building potential of all.
To learn more about a high yield safe investments strategy that can make you rich, click on the "FORECLOSURES" link in the Resource Section below.
- BEST HIGH YIELD MID-LONG TERM INVESTMENTS:
For the mid-long term, I recommend a form of real estate investment that few investors understand or even know about: INVESTING AS A SILENT PARTNER IN RAW LAND DEVELOPMENT PROJECTS.
Raw land development bears no resemblance to other forms of traditional real estate investments that most people are familiar with, such as residential or commercial real estate.
Also, please be clear that I am not talking about buying Raw Land or "Land Banking". (Where you would buy undeveloped property, sit on it for a period of time, pray for appreciation and then hopefully, sell it for a profit.)
"RAW LAND DEVELOPMENT INVESTMENTS" are much different.
Professional raw land developers do not rely on market appreciation for their profits -- unlike "land bankers". Developers actually make their money by obtaining government approvals to use raw, undeveloped land for projects such as master-planned communities, shopping centers, business parks, etc. Once their plans are drafted and approved by the governmental agencies, the newly approved or "entitled" land is worth, on average, 3-5 times more than it was when purchased as raw, undeveloped land. (And this is before any structures or other improvements have been installed on the property!)
IMPORTANT NOTE: True raw land developers are not builders. They acquire raw, undeveloped land, get it approved to build on and then sell it to builders at a 300-500% MARK-UP, on average! This is why raw land development is the most profitable form of real estate.
You may have heard it said that: "more millionaires have been made in real estate than any other asset type of investment". To take that a step further, professionally managed raw land developments are the most profitable and secure form of real estate investment! And that is why raw land developments are cornerstone investments for many of the world's wealthiest investors.
I would love to go into more detail about this investment but that is beyond the scope of this article. For more information, click on "RAW LAND DEVELOPMENT" in the Resources Section below.
Or, if you have specific questions, click on "CONTACT FORM" in the Resource Section below and will respond promptly.