Economics Made Economical

Some Investment Tips During A Slow Economy

Forget about online schemes, day trading, or penny stocks. Their promoters often talk a good talk but unfortunately trying to make money using these techniques takes a lot of luck, way too much time, and usually offers very little in return at the end of the day.

Savings, Checking Accounts, Stocks, CD’s, Bonds?

At present, short-term CD’s and treasury bonds may be your best bet depending on what kinds of rates and lengths of commitment you can find. Regular savings and checking accounts offer zero or essentially zero interest anymore so why give a bank your hard-earned cash just to have them turn around and reinvest it in other higher-yield accounts?

Like checking and savings accounts, CD’s and treasury bonds are insured by the federal government. Unless the government declares bankruptcy before your term is up, which actually isn’t really all that far-fetched these days, you will be guaranteed to receive full interest on a CD or bond at the end of your investment term. Keep in mind, CD’s can carry heavy penalties if you withdraw anything before your maturity date. Bonds can only be exchanged for their full value once their maturity date has arrived.

One of the American banks with the best rates, both borrowing rates and lending rates, at present is the branchless bank ING Direct. ING is able to cut costs by not having to staff banks, not having to set up their own independent ATM’s (money can be withdrawn at most generic ATM machines for free), and by offering and encouraging its customers to take advantage of its plethora of paperless and online banking options. They also rarely, if ever, change fees and if they do it’s usually only a very small percentage (3 or 5% APR) in cases of overdrawing your account. There are no late fees, overdraft fees, inactivity penalties, or anything of that sort. I’ve banked with Wells Fargo/Wachovia, TD/Commerce Bank, Fleet, Bank of America, Citibank, JP Morgan Chase, American Express, Discover, and several others over the years. ING is the only one I’ve been with for nearly a decade straight and have never had any major issue with.

Last I checked, they offer 6 month, 12 month, 2 year, 3 year, 4 year, and 5 year CD options all with very competitive rates of return considering the Fed rate languishes at 0.25%.

Not to turn this into a free ad for ING Direct, but they’re easily the best banking company I have ever had to deal with. There isn’t even a close second.

Mutual Funds/Money Market Accounts:

These can be iffy in an economy like this. It’s possibly best to have a financial adviser discuss things with you before risking large sums of money in these accounts. Then again, a financial adviser told me to invest in one of them shortly before 9/11 and the bubble burst, so don’t necessarily be fooled by the so-called experts. A general rule of thumb when investing into any type of diversified funds account that’s based heavily on the U.S. stock market, and possibly international stock markets as well, is to be conservative if you’re investing for the short term and be more daring and risky with the more volatile options if you are investing for the long-term (25-30 years or longer), for example as a new worker who’s saving for retirement.

An even better option, depending on your own personal situation, could be to diversify your portfolio across high-risk, low-risk, high-yield, low-yield, U.S.-geared funds, European-geared funds, Asian-geared funds, some big known names, some unknown random picks, and anything and everything in between. The more diversified your portfolio is, the better your chances that you’ll at least be making something back in the end.


They’re a crapshoot, especially in these volatile times. As I said above, diversifying your portfolio is the key. It’s easier and more affordable–no need to pay a broker–to do this with a Money Market portfolio, many of which are made up of dozens or even hundreds of different stocks already, than to handpick individual stocks yourself and have to constantly monitor the markets and have your broker on speed dial.

Gold, Silver, Platinum:

Personally I wish I had invested in gold when those late-night infomercials began airing a decade or so ago. Ever since as the prices have risen I’ve convinced myself it can’t go any higher, it can’t go any higher, and I have ended up being wrong the whole way. I’m still thinking to myself, this is it, how could it go up anymore from these kinds of record levels? But I’ve been wrong for a decade. My advice here is caveat emptor. It could keep rising for a few more years or implode. I’m staying away just because the reality has been so different from what I expected. Is it an anomaly? Is it the new safest bet for a long-term high-yield investment? I have no idea and it’s that uncertainty that’s kept me away.

What About My Pension or the Social Security System?

Don’t necessarily count on Social Security or a work-based pension program. Neither of these are guaranteed. They’re assistance that we all hope to one day be able to take advantage of after having paid into them for so many years, but in this economy there are no guarantees anymore.



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  1. Vocab of the Day: Investment « Econoblog

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