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Q. I have $50,000 in a money market fund earning only 2.31 percent interest. What could I do to earn more but still have the money available and safe?
Q. I want to sell my home and invest the money in something safe without hurting the principal. I'd also like to get a monthly check. Can you advise me?
A. With interest rates so low, it's getting more and more difficult to earn a decent return on your money without giving up safety of principal. But thankfully you still can do better than 2.31 percent interest.
If you are prepared to tie your money up for at least six months, EE U.S. savings bonds (www.savingsbonds.gov) are one of the best alternatives. The bonds currently pay 3.96 percent interest, but the rate is variable, changing every six months. The chief drawback is that the interest a savings bond earns is periodically added to the value of the bond. That means you have to cash the bond to get the interest, so they are not the best choice for someone who wants a regular check.
Another alternative is a CD ladder. This is a portfolio of bank certificates of deposit with varying maturities. For example, you might have a one-year, a two-year, a three-year, a four-year and a five-year CD. Whenever a CD matures, you buy a new five-year CD. That way you regularly have money coming due and can catch any uptrend in interest rates. If you wish, you can set up your account so that the interest is paid to you rather than being reinvested.
Shopping around for the best CD rates can improve your return quite a bit. You can find CD yields in the Times and on the Internet (www.bankrate.com).
A ladder also can be constructed using Treasury notes and bonds. You can buy these directly from the government (www.publicdebt.treas.gov), but to get the maturities you need for a ladder, you will have to buy at least some of them through a broker.
Unfortunately, these super safe investments are not going to provide you with a high return. If you are willing to take some risks and/or lock your money up for a longer term, you might want to consider other investments.
However, please keep in mind as you search that high returns always involve high risks. Only deal with reputable companies and read the fine print carefully before signing up for any investment.
Q. My husband and I rolled over our individual retirement accounts from a bank to stock mutual funds. We put all our eggs in one basket, and the market took a dive. Is it possible to transfer my IRA money back to a bank? What will it cost me to do this?
A. Yes, it certainly is possible to put your money back in the bank. Just ask the mutual fund company to close your account and send you a check. Some funds have a redemption fee if you close an account before a certain time period has elapsed. There also might be an account closing fee. To find out the answer to these and other questions, call your fund company's toll-free customer service number.
Note to readers
The IRS is warning taxpayers not to fall for an identity theft scam in which the thieves pretend to represent your bank. Targets of the scam receive a letter asking them to fill out and fax in one or more IRS forms in order to be exempt from tax reporting or withholding. The forms are similar to real IRS forms but request more detailed information, such as bank account numbers and passwords. If an IRS form looks suspicious to you, you can always check it against those found on the IRS Web site, and of course you should check with your bank before faxing off any personal information. If you receive one of the phony letters, call 1-800-366-4484 and your bank to report it.
Online money map
Which sectors of the economy offer investors the most promise? Check out what Mutual Funds magazine has to say on the subject.
-- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.
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