Alright here's a section where i get to tell each and every one of you how you can become the next Warren Buffet, Graham Dodd you pick one. You’re going to become a great investor because there really is a psychology to it. And you know it doesn't necessarily mean you have to study for an MBA, you have to spend years in the trenches on Wall Street and understand what you're doing because all great investors have one quality in common and that is to use their common sense. you know so many of you get talked into things that after you think about it when you get home you say, "No, wait a minute that didn't make sense." but it's too late, you've done it already. So number one always trusts your own intestinal fortitude. If it doesn't sound right or feel right to you it probably isn't and let me tell you let's talk about what you can do between now and the end of this year because it's going to be a rocky second half of the year. You get all these stories about all these things that aren't going to happen and housings turn around and sub prime mortgages and foreclosures are going to come and we're all going to go back to the stores and start spending like crazy, it's not going to happen.
And there's a lot of tension out there particularly in the year where we're going to choose a new president and who knows whether they're going to help us with our taxes or hurt us. So number one, for those of you that want to invest, you can do it but you need to evaluate the risk versus the reward of what you may potentially receive. Investors who are really stressed out don't let anybody tell you that you can't invest in something guaranteed and safe. Yeah, inflations are going to eat it up but better than inflation eats it up than bad investments eat it up because inflation you can overcome some time down the road. Lost of money, you're going to have to come back and make it again or hope you win the lottery or hit the jackpot with one of your picks. There is $1 trillion in CDs nowadays and you have every right to be there as well. Money market, mutual funds, and money market accounts at banks the number of investors putting money into that rises every single week. And in savings and deposits in the banks which are the worse of all of them there's $4 trillion tied up right now.
So investors are looking for the best yields they can get and most of us are looking to get it with the least amount of risk. Therefore, you're going to have to have a lot of safety in your portfolio going forward. one of the ways that you can do it if you're looking for a better yield is to take a look at high grade corporate bonds and industries that are going to be there no matter what happens. You want a double A or triple a rating on the corporate bonds on a 10 to 15-year age range right now. They’re yielding between 5.5% and 6.5%. and if you get quality you're minimizing the risk to your portfolio, and you're beating inflation, municipal bonds, tax frees, double a's or triple a insured bonds, as long as they're general obligations which means the government that issues the bonds, the entity issuing can raise taxes from all areas to pay you, the investor, back. Ten to 15 years right now, tax free, are yielding anywhere from 4 to 4.6%.
That’s a great rate of return because Uncle Sam can get a piece of it. other people look to life cycle funds, which are funds that target a particular year when you're going to need your money, so for example the year 2015, be careful of these life cycle fund, although the concept is wonderful many of the managers have not been scaling back the stock as they get closer to the target date of the fund because they don't want to give up the possibility for better gains the performances on the life cycle funds have been less than stellar you want to check with morning star before you get talked into investing in a life cycle fund. There is some great dividend paying stocks out there that are going to be there. You’re probably going to buy them in a little better price right now. they're still at the moment no more than a long term capital gain stats of 15% do your homework, read, talk to brokers get the analyst's opinions on these companies from several brokers and look at dividend paying stocks. Another way you can go with selected mutual funds and i have a quick group here i want to give you before we end this little segment. These are not our recommendations by the way.
These came from fortune magazine. But and they were all interesting they were all balanced between bonds and stocks. dodge cocks balanced which uses value type stocks and bonds has had a 15-year rate of return, 10.8% there's $100 million in all of these funds invested a lot of happy people. Vanguard, Wellington this mixes stocks and corporate of high quality they've been around for forever 10.4% rate of return over 15 years. Gamco Westwood balanced it's a large multinational value fund; they've don 10.1% over the past 15 years on average. And the Vanguard star funds also another older fund. It’s a fund of funds, it invests in many mutual funds of bonds, US and international stocks they've had a 15-year rate of return on average 9.3%. There are ways to get better rates of return on your investments without taking the risk. Check it all out.
Transcription by:
Scribe4you Transcription Services