Safe Investments: Proper Risk Reward Ratios

There is no such thing as safe investments that are 100% risk-free. Even guaranteed capital investments can lose value due to inflation. However, there are hallmarks of safe investments, and one of these is stability. More volatile investment options can producer a higher rate of return, but the risk of getting wiped out also increases.

Safe Investments: Proper Risk Reward Ratios

A risk reward ratio helps an investor balance the rate of return they can expect to recieve against the level of risk in the particular investment they are contemplating. Used by professional traders, this ratio is is a mathematical calculation achieved when you divide the amount of anticipated profit by the amount of money that would be lost if the investment depreciated or was wiped out. Even if you are not a professional trader, you want to come as close as possible to the best of both worlds for your money - a maximum rate of return while limiting the level of risk. There are several safe investment options for you to consider that can deliver a good rate of return while minimizing the possibility of lost capital.

At the present time, tax exempt money market funds are exploding in popularity. Tax exempt money market funds are one of the most attractive safe investments due to a current high yield  - over 5.5% - much above conventional money market funds. Experts affirm that this high rate of return is a reaction to current events in the credit markets. Investors can feel safer knowing that the rate of return is not built upon junk securities or financially unstable municipalities.

High yield certificates of deposit offer a relatively safe investment with a decent rate of return. With a high yield certificate of deposit you invest a minimum amount of money for a specified time period. In return the bank or lending institution guarantees a specific amount of return at the expiration of the term of the deposit.

High Yield Savings Accounts

High yield savings accounts are safe investments with a compeiitive (i.e., relatively high) rate of interest. High yield savings accounts are typically available only to bank customers who fulfill certain criteria, such as a pre-existing relationship with the bank in question and the ability to make a large deposit minimum. Customers also must maintain a high balance and limit their account transactions. While banks generally only offer high yield savings accounts to their most valued customers, it is a relatively safe, worthwhile investment option if you qualify.

If you don't have a pre-existing relationship with a bank, or you are unable to meet a minimum deposit requirement, you can still benefit from a high yield savings account by looking online. Internet bank accounts offer more flexible participation criteria to their online customers. Often there is a very low or no minimum deposit required to qualify. In return you will have to manage more of your banking yourself, tasks such as making transfers and creating links between accounts. Since with an online high yield savings account these tasks can be managed on the Internet, many banking customers consider the trade-off painless.

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