You may have talked with your financial advisors about investing your money in the form of bonds. Bonds allow you to loan your money out to companies, cities, or the government and negotiate an interest that they will pay you back with. For example, if the city needs money to rebuild a bridge, it can buy a bond from you and pay you back in full and with interest.
When Are Bonds Not Ideal for You?
Bonds can come with certain risks. Depending on who you loan your money out to, you may not always receive it back. If you loan your money to the government in the form of a treasury bond, you will have a “faith in full” agreement that promises you will receive exactly what you have agreed upon.
Since treasury bonds are the most reliable, they do produce the lowest yields. A company with lower credit or less history proves less reliable and, therefore, must pay you a higher yield. You could earn more money this way, but your financial advisors may not recommend it since there is a higher risk of losing your money.
What Are Some Alternatives?
1. Consumer Product Stocks
Investing in the stock market is not always as volatile as you might think. If you invest your money in a consumer product or utility stock, especially in huge corporations, you will find yields of 3% or more. Investing with corporations also grants you security as they can almost promise their stock will not crash.
2. Series I Savings Bonds
If you invest in a series I bond, you get to choose to pay taxes on the interest earned either once a year or after you redeem the bond. Usually, the maturity time on a series I bond is 30 years. Generally, if you have the bond for 12 months, you will only be penalized for three months of interest. If you have had it for five years, you can likely redeem it without being penalized.
3. Stable Value Funds
You can also talk with your financial advisors about placing the money from your 401(k) or 403(b) into a stable value fund. You will receive a stable and high yield as well as a fixed return rate that you set for a certain period of time, starting at a minimum of a couple of months. You also most likely will be able to pull your money out at any time and still receive the full yield value.
For help deciding how to invest your money, contact the financial advisors at Seeman Holtz. Located in Boca Raton, FL, and nine other states, this skilled team of professionals can provide you with risk management, insurance advice, and financial consultations. Call (800) 991-3592 to speak to a knowledgeable staff member or visit their website to review all of their services.