Best Low-Risk Return Options

You need a brokerage account to purchase the index funds...(e.g. etrade, zecco, sharebuilder).

This is why diversification is important and even more important it to look at risk adjusted return.

I bonds are at 3% right now. I don't think you're going to find anything better that doesn't risk principal, but they have their own issues (1 year lock up and $5k max per year).

I use Vanguard to put money into index funds (I use Vanguard's Total Stock Market Index fund, which has very low costs). Vanguard makes it pretty easy to look at where your money is, look at performance, buy/sell shares, and has pretty good explanations of various terms that they use.

My last roommate used Fidelity, which is also a good option. I think Vanguard also will give you free investment 'advice' (Fidelity probably would too) depending on what kind of account you have with them, although I'm not sure how great that advice would actually be.

Index funds do carry risk though (pick a fund and look at performance history on finance.yahoo.com for examples). However, you have the potential for much higher returns. The money is also pretty liquid, so if you need to cash it out you can do so quickly enough (although depending on how you invest, there can be penalties for pulling out quickly, so double check before you pull the trigger).

In terms of 'low risk' accounts though, you'll be hard pressed to find anything over 2%, unless it's a 'high-yield' checking account. These accounts usually have requirements such as 10+ transactions per month, direct deposit, bill pay, etc. If you're okay with those requirements, I'm sure someone here can point you to a high-yield account. You can probably expect around 3%, maybe 4% at most.

Your other options are really a savings account with about 1%, a CD with a slightly better rate if you go for over a year, or your mutual fund.

My recommendation: Money that you need liquid, put in a regular checking account. Money you can't afford to lose, put in a savings account. Put some in a CD or I Bonds, and the rest into an index fund of some sort, or some mix of investments. Your split between CDs/I Bonds and riskier investments such as stocks are really more about how much you're willing to risk. The more you risk, the more you could potentially gain or lose, so this is really a personal choice.

Hope that helps

totally off topic but can anyone here vouch for ally bank? i know they're one of the banks with a higher money market rates. i'm a student trying to save money but not with what my current bank offers.

Ally bank used to be part of gmac (GM's financing arm) and was spun off during the mortgage crisis
They have always had compeditive rates. They are FDIC insured
http://www.ally.com/about/company...index.html

Quote from DWad : I use Vanguard to put money into index funds (I use Vanguard's Total Stock Market Index fund, which has very low costs).

Great choice. I agree: Vanguard is one of the very best places to have a retirement account. They have some of the best customer service as well as the very lowest fees in the industry.

You and may want to consider diversifying into other areas instead of everything in the total stock market index fund. The reason why is you're only exposed to the U.S. stock market with that fund. A lot of the growth in capitalism in the coming decades is going to be outside of the United States. Also, more growth comes from the small-cap sector than the large-cap sector. And, finally, intermediate-term bonds help round out the portfolio with more surety.

I would, therefore, in addition to the Total Stock Market Index Admiral Shares (VTSAX), consider looking into the Total International Stock Index Admiral Shares (VTIAX) as well as the Emerging Markets Stock Index Admiral Shares (VEMAX) or their ETF cousins. I would also consider including the Small-Cap Index Admiral Shares (VSMAX) and the Intermediate-Term Bond Index Admiral Shares (VBILX) or, again, their ETF cousins.

Quote from DWad : Index funds do carry risk though (pick a fund and look at performance history on finance.yahoo.com for examples).

Instead of looking to past performance (investing with a rear-view mirror approach), I would, instead, encourage you to to look to current and future trends [i.e. the lion's share of the growth of capitalism will be outside of the United States, capitalism is beginning to take hold in third world countries (emerging markets) etc.] and invest with this forward-looking approach since, after all, it is the future, and not the past, that will be making you money.

Quote from Brian1 : Instead of looking to past performance (investing with a rear-view mirror approach), I would, instead, encourage you to to look to current and future trends [i.e. the lion's share of the growth of capitalism will be outside of the United States, capitalism is beginning to take hold in third world countries (emerging markets) etc.] and invest with this forward-looking approach since, after all, it is the future, and not the past, that will be making you money.

Past performance can be used as an indicator, but I was using performance history as a means to show that there is risk in index funds, not to say that you should base your choice of funds on past performance .

I would recommend looking into options. Options can be a very conservative method of getting in excess of 5% return with MUCH lower risk than just straight up stocks.

You would want to look into buy-writes on very conservative stocks. Could the market blow up and every stock tank 40%? Of course, but you need to have some risk to get a decent return. That or maybe put a portion of it in that method and go with a risk-free element of another portion.

I write frequently about the basics of options for newbies on my blog, but you would have to consult a professional and/or read a lot of books to feel comfortable finding your conservative positioning.

How did we get from "Best Low-Risk Return Options" to options and emerging markets?

Quote from Samstag : How did we get from "Best Low-Risk Return Options" to options and emerging markets?

Good question.

Quote from evo22 : I also saw discussion of "Vanguard ETFs like VTI, VEA and VWO" - which I understand are index funds (investing a little bit in everything) - but I'm not sure the best way to go about purchasing these!

Quote from Samstag : How did we get from "Best Low-Risk Return Options" to options and emerging markets?

Call Ben and ask him: http://en.wikipedia.org/wiki/Zero...ate_policy

His buddies will not take it too kindly if he let rates rise.......ever.....again....

You will only lose on a relative basis loaning to banks. But since it requires "risk" to "invest your money" then many people are happy getting fleeced and seem to welcome the experience by researching the companies with the sharpest clippers so it doesn't burn so badly.

OP is looking for high yield, low risk. Stocks and Options are certainly not low risk.

Best option would be a High Yield Reward checking account. Most are offered at small local banks and credit unions, there's a list here: http://www.depositaccounts.com/ch...ounts.html

iBonds are a good choice, but tied to inflation, so you typically only know the rate you'll be getting for the next 6 months. Rates for CDs suck but you have a better idea of what you'll earn over that period. In either case, you won't hit anything close to 4-5%.

Thanks for all the comments. It doesn't sound like there's a simple solution to get to 4-5% (I couldn't find any credit union savings accounts that fit the bill).

It sounds like I need to look into: VTI, VEA, VWO, (VTSAX), VTIAX, (VEMAX), (VSMAX) and (VBILX). I have a optionshouse.com (only 4k in play) account and I assume I can purchase these through there - unless there is a better option? Out of the above 8, is there any I should leave out?

Any suggestions on mixes? My initial reaction is to just split my savings evenly across the above funds since I'm not very knowledgeable in the area and they all sound like relatively diversified funds anyway. Maybe add whatever additional amount I want to invest each month to one of the funds, to cut down on trading costs.