How can we avoid making mistakes when it comes to investing? Since no one knows the future, guessing what will happen can be a difficult thing to do. Of course all our goals are not the same and putting ourselves in the same box can be a mistake.
Generally, when people speak of SAFE investments there are generally three that are mentioned.
1. Bank Certificates of Deposit, bank accounts such as savings and money market accounts
The pros and cons are simple, they are insured (FDIC) and therefore safe, the downside is the yield (interest earned) is also very low. The national average for a one year CD rate is about 1.00 %. (www.bankrate.com )
2. Treasury Notes
Treasury notes issued by the US Government are also very safe, but they are generally a long term commitment, up to 30 years. The yield on US Treasuries is also low, if held to maturity; yield can be between 1.15% to 4.84%. (www.treasurydirect.gov )
3. Fixed “Principal Protected Products”
These are guaranteed, fixed, financial products issued by Insurance Companies annuities. Annuities offer benefits many baby boomers find attractive. Benefits such as guaranteed income and freedom from exposure to risk. Historically annuities have had a greater yield than other safe money options, yields as high as 8%. Annuities are safe and secure, fully guaranteed. Each state provides its own guarantee limit. As an example, Tennessee provides a guarantee for annuities of $250,000 per account in Tennessee.