Weighing the Options for Guaranteed Return
Venturing beyond money market and online savings accounts? Weigh the pros and cons--and read the fine print--first.
Investors who were waiting patiently for higher yields on guaranteed investments might have to summon even more patience in the months to come. Worries over a contagion effect from China's slowing growth have stoked demand for safe securities, depressing their yields along with expectations that the Federal Reserve would likely start raising interest rates this September.
The rationale behind the Fed's zero-interest-rate policy has been to encourage investors to take more risks, getting them investing in their businesses and/or in the public markets rather than hunkering down in cash. And indeed, investors who have ventured beyond cash and into stocks, bonds, and most other assets since the financial crisis have been amply rewarded, while the poor cash investor has had to settle for ever-lower yields.