Even though you are looking for minimal risk, there are several
choices. Your best bet is probably a Money Market High Yield account.
These are FDIC insured up to $100,000, so they are pretty safe
(minimal risk of principal loss). Your rate will probably not
decrease over the two-month period, and might even increase if the Fed
continues to raise rates. Many these accounts also allow you to
maintain liquidity, with the option of even writing checks on the
account with certain limitations.
If you want to be certain of locking in a rate, a two month CD would
do that for you. However, the rate is lower and you have no
liquidity.
If you are looking for a risk-free approach, purchasing a one-month
Treasury now and a second one-month Treasury in a month would achieve
that for you. However, you will not know what your second month's
rate is until you buy it. The yield is also a bit lower than some
other options.
Money market mutual funds are another option. They are a little more
risky than a bank product, but are very liquid. However, you are
losing some yield.
Short-term bond funds are an option, but they are riskier and are
yielding less, so I have not listed any specific ones. A more
adventurous option is a floating-rate fund, which has a higher yield,
but also involves a greater risk of principal. Fidelity Investments
has one yielding 3.99% that has one of the more reasonable expense
ratios in the industry.
My personal preference would be to go with the Money Market High Yield
Account. I have had good success doing business with Capital One
(www.capitalone.com) with this type of account. For a list of several
banks with this type of account, click on the first link.
Sincerely,
Wonko
"Money Market High Yield (MMA & Savings Accounts) and Savings Account
Rates" Bankrate.com http://www.bankrate.com/brm/rate/mmmf_highratehome.asp?params=US,416&product=33&sort=2
Current highest rate is 3.25%.
"High Yield Rates for 2 months CD" Bankrate.com
http://www.bankrate.com/brm/rate/high_ratehome.asp?params=US,416&product=160&sort=2
Current highest yield is 2.70%.
"Selected Interest Rates" Federal Reserve (May 6, 2005)
http://www.federalreserve.gov/releases/h15/update/
Current 1-month Treasury is 2.60%.
"Fidelity Floating Rate High Income Fund" Fidelity Investments
http://personal.fidelity.com/products/funds/mfl_frame.shtml?315916783
Current 30-day yield is 3.99%.
"Spartan Money Market Fund" Fidelity Investments
http://personal.fidelity.com/products/funds/mfl_frame.shtml?31617H201
Current 7-day yield is 2.64%. |
Request for Answer Clarification by
arpagenx-ga
on
09 May 2005 19:38 PDT
As people tended to answer this the same way, I must have worded it
incorrectly in some technical way. You assumed my focus was to
minimum risk. I assumed my focus was maximum gains. Perhaps I should
have used some phrase suggesting the risk was "appropriate", whatever
that means. Perhaps you can suggest how I might have worded this.
Perhaps I also assumed that people read my previous posted question
about maximum gains in 2 days, which would have been unlikely to
include a simple interest bearing account as an answer. For instance,
even a two month invest in an "average" mutual fund like Lord Abbot
could be expected to yield 5% per month.
To adar_23: I have perused SYNCInvest and requested additional
information. I would certainly want to know more about how safe this
company is. However, the principal is locked for a minimum of 6
months, so I don't see how that qualifies for my two month investment
period.
To those who answered akin to 3% ANNUALLY, assuming that I would not
have penalties for withdrawal after only two months, that would have
returned $100 profit. On the other hand, I could have bought about
800 shares of Microsoft, which is arguably one of the safer
investments in the market even if not a high-flyer. For a $.25 move
on any given day I could have captured $200. Certainly, on any month
a $2 move would have net $1600. Even if I had been wrong nearly half
the investment period, I could have been in and out of the position
and still captured a better profit that sticking the money in a sock
or a 3% annual interest bearing account.
Yes, of course, I will still award this, but would you mind clarifying
in light of my comments? Thanks! Sorry for any confusion.
|
Clarification of Answer by
wonko-ga
on
09 May 2005 21:17 PDT
The statement "minimal risk" was what created the confusion. You
might have tried something like "maximize my investment gains with no
more than a 50% chance of loss of principal" or whatever probability
of risk you were willing to tolerate. "Appropriate risk" is also
likely to be too vague because it is impossible for us to know what
you would view as "appropriate risk" without additional information.
So, a much more precise statement regarding the actual risk you were
seeking would have resulted in a different Answer.
As for assuming a Researcher has read your other questions, your best
bet is to explicitly include a link to your other question along with
an explanation of how this question relates to that one. Then there
would be no confusion.
I am sorry this confusion occurred, and I appreciate your willingness
to stick with the Answer despite it. If you would like to try to
better formulate a statement regarding your risk tolerance, perhaps
myself or one of the commenters can aid you in finding an appropriate
investment.
Regarding MSFT, it is really not one of the safer investments in the
marketplace. Its Beta is 1.434 ("Microsft Corp Key Statistics" Yahoo!
Finance http://finance.yahoo.com/q/ks?s=MSFT) and you would have lost
almost 7.6% during the period Feb 3 to Apr 1, 2005 ("Microsoft Corp
Historical Prices" Yahoo! Finance
http://finance.yahoo.com/q/hp?s=MSFT). One of the "safer" investments
in the market would have a Beta less than 1. The S&P 500 is usually
the standard for the market and assigned a Beta of 1.
Sincerely,
Wonko
|
