Wise, cautious Investments

[Chief]

Greetings:
I've noticed some of my clients have done well with investments in bonds while many others tend to go with CD's from FDIC institutions. What would you consider a wise investment today with little risk but good payback?
I've noticed that FDIC banks on the Net are offering higher rate CD's than local banks. Are there risks involved with dealing with banks in other states? What do you think of municipal bonds? Are these safe, insured? corporation bonds?
I know this is more into financial planning but it does have a relationship to tax planning as well.

[JohnSpadaEA]

Investments

Sounds like a very low risk investor. Muni's and Corporate Bonds have market risk, much lower than stocks but still its there. If your looking for a better return than a local bank CD try ING Direct or a local credit union.

[Mark Goldberg]

Cd's

BY my recent research bank CD's are better than bonds. Interest rates are the same or better and no risk.

[Chief]

investments

John and Mark: My recent research also validates your claims. I have found Corus Bank in Chicago paying 3.88 % on 6 mos CDs and 4.11% on 12 months CDs. FDIC insured.

[BOB W]

Investments

I think you guys have hit on a topic that should be talked about more on this board. Our daily contact with clients' investment questions needs to be just as current as tax law. Sharing various insights and current interest rate around the country can be very helpful.

[Unregistered]

taxfun

Ginniemae's are one my favorites.

[Bees Knees]

Interest Rates

This site: http://www.bankrate.com/brm/default.asp seems to have alot of info in this area....

[S T]

Investments

Keep in mind that bond rates go down, when interest rates increase! Interest rates are now increasing, so bonds are not necessarily a good investment. Internet banking seems to pay slightly higher interest on deposits, but also check out some of your local Federal Savings Banks as opposed to Wells Fargo, Bank of America, etc. (these pay less)

Also, as a point of reference that we personally found out, we deposited with a FSB in our area and committed to a 5 year CD and received a 4.5% interest rate ( in 2004) 5 years is a long time, but if interest rates really increased, the FSB advised us that we would only be penalized 6 months of interest. So far we have not found a better rate and have been receiving that 4.5. If and when the time comes, and interest rates increase substantially, after doing the math we would still be ahead.

Also, as some Banks and Savings advertise consider the "laddering" of investments.

I agree this would be a great topic to pursue!

Sandy

[BOB W]

1 Yr Cd

Upon reviewing bankrate.com, I find that most banks are rated with 4 stars. Two, GMAC and Capital One have a 5 star rating. Ing has a 3 star rating. Appearently 4 stars is the norm but 3 or less can be questionable. I wonder how the ratings are established?

[S T]

Bankrate.com Ratings on Banks

BankRate.com ratings has to do with the financial stability of the institution based on a composite rating. They rate FDIC, Thrift and Credit Unions. In case you didn't find it here is the link to the rating information http://www.bankrate.com/brm/safesound/ss_home.asp You can also obtain a report and financials of their rated institutions at this website.

Sandy

[BOB W]

Sandy

Thanks for the feed back....

[Chief]

Wise Investments

I've notice that JB Hanauer with CDSearch 123.com seems to be a good source for all CD's from many institutions that are managed in one account and statement.

Thanks to all of you who have posted on this topic.

[John of PA]

Personally, I like Equities

Personally, I like Equities. Many equities pay 4,5,6,7%. How about a Ford Credit Sr. Note @ 8%. Or a good REIT at 5or6%. You spread the risk by diversifing into numerous equities. A high quality utility stock at 3 or 4%. Unlike CD's you get dividend increases along with potential principal increases. I have done very well in this over the years; however you can't count on the markets always having good performance. Thats why you diversify among industires as well as among numerous equities. One can easily get double the CD rates doing this. A subscription to Valueline or Morningstar makes it almost a piece of cake.

[BOB W]

Equities

John, your equities investment's rate of return is very good. Ford has been in favor for several years now and probably still is. I've moved away from any market timing or market investments after being hurt prior to 9/11 and after 9/11. Market conditions are just too "up in the air" for me at my age of 62.

Since I am not a registed rep, specific investments are not in my client/practioner inventory. I am in favor of locating investment advisors' who work for a consultation fee that do not earn a commission on each trade. I've seen too much "churning" (buying and selling just for commissions) from your everyday brokers. I'm not even convinced that "Asset Management" for a fixed % fee are all that good either.

There are still "depression era" people that are afraid of banks to this day, not that there are many left.

The market in general is very questionable. Terrorist conditions will be around for many years to come. Any one incident will be a minor blip, but cummulative blips will start to add up over the next 5-10 years. I don't see that changing anytime soon. If they start to mount a campaign of shorter duration between attacks you will see market declines big-time. As of right now small market dips are their effect.

Older (50 +) investors need to be very cautions of equities posistions. "Shorting" the market may have better posibilities than going "long".......

For younger investors (40 and under) it may be a good time to buy on the dips. But older investors, it could be a financial disastor. It all depends when the investor needs to have access to the money and can liquidate the equities with a profit.

Well enough of my rambling.............

[Bjorn]

Some stocks that pay dividends

I like the Income Fund of America if the customer understands the risks and rewards. Also consider the time frame needed for the money.