3 Ideas for Savings Investors - Series I Bonds, Municipal Bonds, Online Bank Rate Deals

The stock market has had a rough start in 2008 with the Dow Jones Industrial Average down 10% for the year with more trouble anticipated. The volatility of the markets has launched a continued flight-to-quality into safer investments just at a time when the rates and yields on those investments are dropping in line with the reduction in interest rates by the Federal Reserve. A Savings Investor looking for yield and safety might review these three investment options:

(1) U.S. Series I Bonds - A nice feature of the Series I Bond is that is locks in rates for six months at a time. This is an attractive feature in an environment of falling interest rates. Currently the yield on the Series I Bond is 4.28% - comprised of a fixed rate of return of 1.20% and a variable inflation-adjusted rate of 3.08%. In case of a recession, the variable rate of return is 0.00% and the investor only receives the fixed portion. With many economists predicting a short recession (if any at all) with the potential for explosive economic growth at the end of the recession, the inflation bond may be an interesting investment. The bonds can be purchased online at http://www.savingsbonds.gov/. Currently their is a calendar-year limit of $5,000 per purchaser.

(2) Municipal Bonds - Many fixed-income securities have rates and yields which move in lock-step with movements in the Fed Funds rate and or U.S. Treasuries. The global flight-to-quality in 2007 and 2008 has driven the yields on U.S. Treasuries very low, while these same global investors who do need the tax-advantage of a municipal bond have not purchased munis to the same level. Consequently, the tax-equivalent yield on muni bonds are comparing extremely favorably to other fixed-income investments - in some case a full point to a point and a half higher in yield than a U.S. Treasury or other Government-backed security. Investors should remember that municipal bonds are not federally-backed or guaranteed so careful attention should be made to the issuer and their credit rating.

(3) Online Bank Deals - Bank continue to offer excellent rates despite the 125 point cut in the Fed Funds Rate over the last six months. TD Ameritrade is still showing their 90-day CD rate at 5.30% while KeyDirect has rates as high as 5.55% on their longer-term CDs. Reward checking account offer yields as high as 6.25% to investors who meet monthly banking requirements in their account including receiving online statements, ACH auto-debit, and/or check card transactions. Visit the money-rates.com Rewards Checking page for more information and details.