Safest High Yield Investments
If you want a reasonable assurance of protecting your capital but want a high yield, consider safe high yield investments. Before investing understand your options and the characteristics of each high yield alternative.
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High Yield Savings Accounts
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High yield savings accounts are one of the safest investments you can make because they are insured for up to $250,000 per depositor for each ownership category by the Federal Deposit Insurance Corporation. If a bank goes out of business, your savings will be assumed by another bank. To shop for the best savings rates, check with a site like Bankrate.com. Once a year examine your current savings rate and shop other banks to determine if their rate is high enough for you to transfer your savings with them.
Certificates of Deposit
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Certificates of deposit are similar to a savings account but require a lump sum purchase upfront from these financial instruments. They usually pay a higher interest rate than a savings account.
A CD matures in a specified amount of time where it can be cashed for more than you bought it for. When the CD term allows it to be redeemed, it can be cashed in or rolled over into another CD. The longer the term of a CD, the higher interest rate it will pay. CDs for as long as ten years can be found. Before purchasing a CD, consider the advantages and disadvantages of tying up your money for the period specified.
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Money Market Investments
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A money market investment is a highly liquid investment. Many of these have a maturity of one year. Money market investments offered by the government and municipalities are tax example.
Although a CD is considered a money market investment, other types of money market investments include federal government short term securities, notes from municipalities, treasury bills, mortgage or asset based securities. Money market investments are often used by corporations to park funds which may be needed again in the short term.
High Yield Bonds
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Although safer than stocks, high yield bonds have higher risk because the issuing entity is not given an investment grade ranking. High yield bonds are issued by organizations to secure capital. The bonds pay a set percentage rate and the financing source agrees to pay you back the bond principal upon the maturity date of the bond.
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