prancingbull.com

Friday morning when I got to work I had an email from our Financial Analyst. Typically when I get an email from her it means that we have changed an important rate. This email said that we would be lowering our CD rates once again effective February 11th, 2008. All across the board we lowered them by 20 basis points (a basis point is 1/100th of a percent) with the exception of our 6 month CD which we keep at such a low rate that no rational investor would ever put money in them. Our rate for CDs over 6 months dropped from 4% to 3.8%.

This drop in savings rate shows our desire to stay consistent with a market that has seen the federal funds rate cut twice over the past month. Our rate cut can be seen as a blow to our members who may have CDs maturing soon. Over the past few months I have seen people coming in droves to cash out their matured CDs because they cannot afford to keep them in savings.

While this exodus of funds is not what we are striving for as a financial institution, you can’t really blame the customers for wanting to take their money out. At such low rates the money one makes in these low yielding CDs will barely keep up with inflation.

So what to do if you have a lot of money sitting in savings accounts right now? Well CDs and savings accounts are not really the place to be right now. You can do a bit better with some bonds, but not a whole lot. It is also hard to tell what direction the stock market is headed in right now, so that is probably not the best place to put your funds, especially if you are not one to take on risky investments.

Many mutual funds have been down this year, but here is a consistent performer that is not super risky. Its’ return for the year so far is -0.69%, but this isn’t bad compared to many funds that are at -12% for the year. The fund that I am suggesting is the Fidelity New Markets Income Fund (FNMIX). This fund avoids much of the risk of the stock market by investing in international bonds.

Here are the returns for this fund over certain periods of time:

Although this fund has been slightly down for the year, it can be seen that is has been a consistent performer over the years. If you are considering cashing out a money market or CD sometime soon, be sure to check this fund out before you commit to something else.

The minimum investment for this fund is $2500

This fund is currently trading at $14.49. I highly recommend this fund with a rating of 4.5/5, because of its investment in international bond funds. The fund eliminates the risk of the stock market, while earning higher returns, because foreign bonds currently have better returns than US bonds.

I currently do not own this mutual fund. For a list of my current investments, click here. To view a list of my current recommendations, click here.

Personal Finance cd, mutual fund