What Are Safe High Yield Investments?
An important rule of investing is that the majority of traders and investors buy when high and sell when low. Perhaps that is the most important rule of investing, because if everyone bought when low and sold when high, the financial markets would be perfectly efficient. Every investor and trader worth his salt knows otherwise. In fact, the “efficient market hypothesis” is one of the greatest economist-generated falsehoods known to the American public.
After getting burned in a correction, as many investors did during the treacherous fall and winter seasons of 2008, these investors simply get out of the market altogether. The thing about investors is that while they are characteristically hyper-emotional, they are smart enough to recognize when they have gotten singed. A major correction is one of these times. Thus, investors sell their assets and move their money into what seems to be safer investments.
The knee-jerk response to a crisis is to move money into government bonds, whether long-term or short-term. Government bonds have the advantage of being guaranteed by the full faith and credit of the United States government, which means that investors can never lose their money. They also have the disadvantage of rather low interest rates, which generate returns that are feeble when compared to the 2003-2007 bull market. With bear markets, investors are willing to take these lower returns in exchange for lower risk.
Investors seeking safe high yield investments flee to high-quality bonds when the capital markets are in turmoil. Sometimes the returns on bonds can be quite high if bond investors are absolutely convinced that financial catastrophe is just around the corner. Safe high yield investing does not have to solely revolve around the debt securities market, however. There are other opportunities out there for investors seeking these kinds of assets.
For example, a safe high yield investment that has gotten a lot of attention in recent years is a money market savings account from an online bank. A money market savings account can offer higher interest rates than regular savings accounts, though not as high as returns from the capital markets. The money market is an essential component of the financial system because it enables liquidity to be available to banks, investment companies, corporations, etc. The money market provides the oil that greases the gears, so to speak.
Therefore, a money market savings account is a high yield safe investment for investors who are naturally conservative or who want to keep their money away from risky investments. Money market accounts and bonds are the safest investments around. Investors seeking high yield safe investments have no further to look, since these instruments guarantee their funds and they provide some interest returns.
Related posts:
- Can Low Risk Investment Opportunities Give Profitable Returns?
- Making Small Investments Still Brings Great Returns
- Finding A Good Income Investment
- Balanced Mutual Funds Are Retirement-Oriented
- Understanding Annuity Investments
Leave a Reply