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Safe Investments

- Alan Lavine and Gail Liberman

In case you haven't looked lately, there are some attractive high yielding investments. But the higher the yield, the greater the risk.

Here's what to examine regarding safety.

  • Ratings of AAA by Standard & Poor's and Aaa by Moody's represent the strongest issuers of corporate bonds and municipal bonds. Below triple B is risky!

  • For an extra measure of bond safety, consider insured municipal bonds, backed by the Ambac and MBIA, two large municipal bond insurance companies. These companies only insure municipal bonds that already have the top ratings by Standard & Poor's and Moody's.

  • Considering a fixed annuity? Insurance companies rated A+ and A++ by A.M. Best and AAA by Standard & Poor's are strongest. Insurance companies rated below A by those same rating agencies are not as strong.

  • Prefer to keep your money in federally insured bank deposits and only do business with a bank?

  • Call 1-877-ASK FDIC or visit www.fdic.gov to confirm that all your deposit accounts are fully covered in the event of a bank failure. The FDIC provides $100,000 worth of coverage per depositor, $250,000 for retirement accounts. It's easy to get tripped up with joint accounts and trust arrangement.

  • Monitor account statements extra-carefully. In the event of a fraud, you could run into problems getting reimbursed by your bank if you fail to report it any errors promptly.

  • Get any type of check or money order from someone you don't know? Don't deposit it. Call the bank issuing the check first to confirm it's not counterfeit. You could be held liable if you deposit it. The FDIC does not cover fraud.

  • If you use a bank safe deposit box, don't expect insurance coverage from a bank or the FDIC. Make certain your homeowners insurance covers valuable contents.

    To get the most income out of your bank CDs or bonds, consider dividing your money up and staggering it in maturities. You might keep some money in a high-yield bank money market deposit account to earn current yields. Then, put money in one-year, two-year and three-year CDs, for example. This typically gives you a higher blended yield. If rates rise, so should your money market account rate. If rates fall, your longer-term CDs or bonds still will pay you higher rates. Plus, you'll have money maturing at different intervals in case you need it.

    If you invest in bond mutual funds, stick with low-cost funds. The average bond fund sports and expense ratio of 1 percent. You want below average expenses. Also avoid bond funds with front-end commissions.


    Spouses Gail Liberman and Alan Lavine are syndicated columnists. You can purchase Alan Lavine & Gail Liberman's latest book Quick Steps to Financial Stability (QUE Publishing 2006) online at www.moneycouple.com or at your local bookstore. E-mail them at MWliblav@aol.com.

    To read more columns, please visit the column archive.

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