What is better than a savings account?

Question

i currently have a large sum of money in a savings account that earns 4.75% interest. what are some other options, im wise with my money, but know little about mutual funds or the stock market.

Answer 1

One option to consider is t-bills. 3 mo and 6 mo currently pay about 5% maybe just a tad more. The bid advantage of t-bills over a savings account is that t-bills are exempt from state and local taxes. You do live in a state with those taxes, don't you?

http://wwws.publicdebt.treas.gov/AI/OFBills

Historically, good mutual funds have returned about 10%
annually over a long period of time. They may suffer sever losses at times however as from 2000-03 when many lost 50% of their value. Besides the historical 10% return there is also the advantage that dividends from mutual funds are tax advantaged being taxed at about 1/2 the rate of interest income. So you have the potential of winning 2 ways. Better historical returns and better tax rate.

Here are several to consider: PENNX, GAM, SWZ. The last two are closed end funds that you buy like stocks. The first is sold by Royce Funds. All 3 have excellent historical returns of above 10%.

Mutual funds however are not like cds risk wise. There is risk. That risk can be mitigated somewhat by not placing all of your dinero into just one mutual fund. Invest in several to mitigate the risk.

Answer 2

First i don't know of many banks that offer 4.75% on your money that is a pretty good interest rate. However I would look into corporate bonds but check the companies bond rating and make sure it is not below BBB for a solid safe investment. Also i would look into a Roth IRA because you won't be taxed on your money when you get your distributions assuming you have reached 59 1/2 years old when you start to draw from it. From there on an IRA you would look for what you want, if you are older you would want low risk securities like money market funds and if your younger you want stock funds because though the risk is higher the return is also much higher, and if you have years until you retire than you can afford to possibly lose money a few years. Also if you get into stock funds, go with index funds because you won't have high management fees because they are run by a computer not a money manager charging 200 base pts and making 50 million a year off running the fund. But anyways the best bet is to talk with a financial advisor they will steer you in the right direction.

Answer 3

A couple of ideas for you. U.S. Treasury Inflation Proteced Securities (T.I.P.S), otherwise known as Series I Bonds. Annual purchase limit $30,000.

A Royalty Trust (Oil, etc.), such as SBR, traded in the Stock Market, which can pay a high dividend - just make sure that any such company you invest in has: #1: proven reserves left so they don't have to disband; #2: is not borrowing money to pay those dividends. Do NOT put all your money into one, but at least three to spread the risk.

A convertible Bond - like owning a Bond (first in line to be paid if company goes bankrupt), yet if the Stock rises, this Convertible (as they are called) can also go up; so the idea is that you have the benefits of both Bond and Stock ownership (safety, plus capital gains).

A Mutual fund that owns Convertible Bonds or Royalty Trusts, or both. Be careful that it is not so high-yield in nature that it is considered to be a "junk bond" fund, as they are vulnerable to company defaults. If you go to Barron's they will break the funds out by type.

Dollar-cost averaging into the QQQ or DIA (Nasdaq 100 or Dow "Diamonds"). Dollar cost averaging means you buy the same $ of the item per month (or week, etc,) so that if it goes up, you have more shares to profit on; but if the stock goes up and then you buy it just before a downturn, you have less shares to get hurt with. (BTW this is a great way to save $ when buying gasoline or anything else).

Tax Lien Certificates - most States have periodic county-wide auctions of these. Tax lien certificates are sold so that the taxing authority can collect the cashflow that is lacking whenever a property taxpayer becomes delinquent on his/her property taxes. Some States' TLC's pay a very high rate, as much as 30% per year. A risk is that once you buy such a certificate, if the person who is delinquent goes bankrupt, you could be left holding the bag - so when buying such TLC's, always buy a lot of little ones and do NOT buy them all in the same area, as there may be a lot in that region because the local economy is weak. Three major drawbacks: when the TLC matures you will have to find another, and the rates may have gone down; you will have to correspond with each county in the U.S. as there is no central clearinghouse; to be absolutely secure in this you may have to visit the property itself to make sure the property is worth the debt (believe me some aren't!); sometimes people have liens on campsites, etc. STAY AWAY FROM THOSE; A final note of caution: do not buy a TLC on the most expensive property in the County, as there may be no demand for a repossession sale.

Once you have gotten a little more education in the market by going to the CBOE website, then you may want to think about learning how to trade options - but they're not for the fainthearted!

Answer 4

You are doing great if you saving account is paying that high of an interest rate. Mutual funds will give you a better return but you won't have easy access to your money.

Answer 5

Try reading on Scudder Funds, Fidelity, Vanguard. Ask around. These have been good to our family when we've put cash in. My kids educations are paid for because of these and my retirement future is bright.

Answer 6

A good bet is a CD. Go in to your bank and ask them how to go about setting one up. They have a high return with little or no risk. I believe there is usually a $2500.00 minimum though.

Answer 7

CD's

Answer 8

a roth IRA that way you don't ever get taxed on your $$

Answer 9

a money market acct, better interest less hassle

Answer 10

don't know