If you are looking for a risk-free way to invest your money and help it grow, the answer might be as close as your local bank. Banks offer a number of investment options, including insured products like certificates of deposit, money market accounts and savings bonds, as well as more volatile choices like stock and bond mutual funds. Choosing the right options for your needs can allow your money to grow without undue risk.
Check the Federal Deposit Insurance Corp. (FDIC) coverage status of the bank by visiting the FDIC website (see Resources). As long as the bank is fully FDIC-insured, your certificates of deposit, savings accounts, checking accounts, money market accounts and other bank instruments are insured up to $250,000. This FDIC coverage does not extend to investment vehicles offered by the bank, such as mutual funds and stocks. Always get a clarification on FDIC coverage before investing in any product offered by your bank.
Decide what types of investments you are interested in. Choosing bank products that are FDIC-insured keeps your money totally safe, but the returns will not be as high as riskier investments like mutual funds. Banks sell not only guaranteed investments but riskier ones as well, and it is important for customers to know the difference.
Request a rate sheet from a teller at your bank. The rate sheet is a list of all the accounts at the bank, both deposit accounts and loan products. The document lists the current interest rate on all those products.
Compare the yield on liquid investments like money market accounts and savings accounts to less-liquid choices like certificates of deposit. The rates on CDs tend to be higher than either money market or savings accounts, especially if you are able to keep your money tied up for a number of years. You need to weigh the benefits of a higher rate against the inconvenience of not having ready access to your cash.
Discuss any additional investment options with an account representative at your bank. Ask for full disclosure of any fees and expenses, as well as any commissions involved in the sale. If you are interested in mutual funds, you might be able to find less-costly investment options by working directly with a low-cost no-load mutua- fund company.
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