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Redhotman
12-29-2003, 07:22 AM
What is the highest amount of fixed interest I can earn on 30,000.00
Is fixed interest considered stupid? How risky are mutaul funds?

adios
12-29-2003, 11:14 AM
"What is the highest amount of fixed interest I can earn on 30,000.00 "

I would think some distressed corporate bonds with a high probability of default have an amazingly high yield to maturity. No offense but see where the problem lies with your question? You have to give info on what kind of risk you're willing to bare.

"Is fixed interest considered stupid?"

Not at all, nothing could be further from the truth IMO.

"How risky are mutaul funds?"

All kinds of mutual funds in equities and fixed income. It's hard to answer your question without knowing the returns you're seeking and what holding periods you're willing to undertake.

Redhotman
12-29-2003, 11:49 AM
Obviously I know nothing about investing or this subject, it seems a bit more complicated then bankroll managment.

Basically I would like little risk. I am aiming for 10% yearly return. Is this do-able?

adios
12-29-2003, 12:08 PM
I assume you're referring to 10% compounded rate of return. Using the caveat of "little risk", probably (not certainly though) if you're willing to hold something like SPY (S&P 500) for 20+ years and re-invest the dividends. Although the S&P 500 isn't fixed income. To acheive returns of 10% or more at a compounded rate IMO you're going to have to do a lot of work and you'll have to take more than "a little risk" to acheive such ends. Some will argue that I'm wrong about the "lot of work" part due to the pricing effeciency of markets. Those people who would state I'm wrong are certainly IMO worth listening to.

Redhotman
12-29-2003, 01:22 PM
im confused... doesnt a normal bank account pay out 7% interest paid out quarterly?

adios
12-29-2003, 01:32 PM
Nope and I'll stand corrected if you indicate the bank. You must not have had your money in a "normal" bank account for quite awhile /images/graemlins/smile.gif . Yields on "normal" savings accounts were less than 1% last time I checked. Here's a link on CD rates from bankrate.com:

Savings and CD Rates (http://www.bankrate.com/brm/rate/dep_home.asp)

A quote from an article regarding record lows in savings account rates at the link I provided:

The national average interest rate for passbook accounts in the country's top 10 metropolitan markets is 0.50 percent, down nearly 17 percent since our spring 2003 survey. The average interest on statement savings accounts fell more than 23 percent to 0.46 percent.

If you want to earn a rate 3% above the what a savings account pays then that's a different question. One thing that I didn't mention that you should consider is long term inflation rates.

squiffy
12-29-2003, 02:34 PM
You should strongly consider doing more basic reading on investments. I am shocked you did not realize how low interest rates are these days on normal bank accounts.

Go the bookstore or library and start reading some very basic books on investments. If you are willing to invest in the stock market, after setting aside a portion of your money for emergencies and after making sure you have adequate disability insurance, put the balance in something like the Vanguard 500 Index fund so you won't be paying much in transaction costs and fees.

If the stock market does well, your earnings will track those of the S&P 500.

But unless and until you do some basic reading and studying, keep your money someplace safe like a bank account or CD. But ultimately you have to make these financial decisions and it is vital that you educate yourself as much as possible.

You can also check out websites and magazines. For example money magazine at www.money.com (http://www.money.com) or www.quicken.com (http://www.quicken.com) which have some personal finance info. Also check out www.ameritrade.com (http://www.ameritrade.com) if you can access the personal finance portion of the website.

Or check out the financial section of yahoo. They should have a personal finance section.

You can also go to www.fool.com (http://www.fool.com) which is the motley fool website. I don't always agree with all of their advice, but my impression is that their basic personal finance info is pretty basic and accurate.

Wildbill
12-29-2003, 05:05 PM
Best rate I know of, and I have invested some money in, is the Orange account with a rate of 2%. That is about what you would get on 2 year CDs in some cases, yet it is a liquid savings account you just tie to your bank account.

For a little more risk, go with a short-term bond fund that all the big mutual funds have and would gladly let you in for a 30k investment. Expect about 3-4% return overall in 12 months from today. Those are invested in solid short-term paper that only on rare occasions go bad. Most of it is repo rates from borrowers with AAA or AA credit and since it is reinvested nightly it is hard to have a risk there. In fact, if I remember right more of the risk is with the intermediary brokers, not necessarily the issuers of the paper itself. I remember a company I worked for that held billions in repos got burned for a small chunk of change when Kidder Peabody went under. Similar messes could come out of an LTM-type disaster, but short of that the 3-4% is a very safe place to park your money and better than almost anything else out there. I take it you aren't looking for a long-term place such as S&P over a decade or more, but something you can take out in a day's notice.

BadBoyBenny
12-30-2003, 02:06 AM
7% in a bank is not going to happen, look to mid grade bonds or an REIT with a high yeild.

My sugestions are as follows. If you're holding for about 5 years go 30% mid grade bonds (9000) maybe some kind of bond or total return fund, 30% in an REIT index (9000), and 40(1200)% in an S&P index like Spyders. If you're holding for 10+ Years I would suggest something like 60% S&P fund, 25% REIT index and 15% bonds. Less than 5 years, anyone who says they can guarantee 10% return or even 7% safely is probably overlooking some kind of risk. However other people may be able to give you other portfolio advice that is better.

If you have any kind of debt in a credit card, car, or house, you're biggest and safest return may be paying that down, especially because you don't get taxed on paying off debt like you would on dividends or capital gains.

There is no such thing as a risk free investment, especially when you consider inflation. Ultimately you will have to decide what you are willing to risk your money in and what kind of return you will need to get from that investment. Beware that does not always mean more risk = more return though, the greatest returns are from either owning a business or selecting individual stocks. In both of these areas the majority of people fail the first time. And in both areas it is never a good idea to put your money somewhere just because someone says it looks like a good investment. I like index funds much better than managed mutual funds because the average mutual fund has historically underperformed the market indexes, even without taking out fund management fees. Ultimately you will have to decide and accept consequences for your decision.

IMO You should do the following. Check out the motely fool for basic financial advice, check out other sites for technical research and comparisons, if you're looking for a fund company check out Vanguard or PIMCO.