In case you haven't noticed, we are in a period of turmoil, economic uncertainty, and a lack of confidence in our government and regulators. More than likely, the investment markets will remain stagnant, with little movement in either direction.  If there is to be a strong movement, it most likely will be negative. Interest rates will remain low, so savers will get precious little from banks, and retirees will struggle with low interest rates on their retirement nest eggs. Not a rosy picture.

Money has been flowing into bond mutual funds, an indicator of the fearfulness of the investing public. These funds are intended to provide safe and steady returns, but can be negatively impacted by declines in the market's confidence in bond issuers ability to pay, and an unexpected rise in interest rates, which might occur if United States obligations are downgraded by rating agencies.

There is no perfect hiding place, but there are options that can provide decent returns with relative to excellent safety. First, there are short term fixed annuities issued by financially solid insurance companies.  These can be for as short a period as one year and provide an interest rate up to four times that of money market funds and bank accounts and certificates of deposit. At the end of each period, the account can be renewed or terminated. Insurance carriers invest in quality bonds, so there underlying assets are solid.

Unit trusts are unmanaged portfolios of dividend paying stocks. They tend to be more stable in value than funds, and have a maturity of only two years. Assuming that the market stays in a narrow value range, which is likely, the dividends will generate a higher return than savings vehicles and are more favorably taxed. Unit trusts also have some little known tax leverage that can be helpful in managing the tax liability.

Floating rate funds are another option.  These are based on securitized loans made by banks to their corporate customers. Remember, banks charge a lot more interest from their borrowers than they pay to their depositors, so these funds can provide a relatively safe return above those of saving options.

Lastly, depletable assets like minerals, raw materials and the like are being used up at increasing rates as economies outside the United States mature and grow. As supplies grow more scarce, prices tend to increase.

Funds that concentrate in these areas are well positioned.

For specifics on any of these categories of safe hideouts contact us at anadolna@associatesgroupinc.com