Alternatives to Real Estate

In a low-to-no-risk investment you are making 2% in this market? Please tell us how! Wanna make more? Then you obviously accept more risk and would be solving a major problem of current low interest rates that is confounding all attempting to preserve wealth. There is no answer to this question. Traditional CDs and the like are paying nearly nothing. You haven't mmissed anything here. It's a problem.

Bankrate.com

yes I am ready to accept more risk, still a low risk but more risk and that's my dilemma, it seems that you have to go from no risk to high risk.

Bill Gross of Pimco suggests utility stocks. You can read his commentary on Pimco's web site. As I fear rates rising, I'll accept no return on my savings not in equity.

Bill Gross has a point...

"I figure, why not just buy utilities if that’s what the future American capitalistic model is likely to resemble".

Good question. My situation is similar to the OP. A number of people I know are sticking with the suicide-pact, indexing cant-outsmart-the-market thing.....and others giving it lots of thought are dabblin in gold and eem, but heaviliy in cash earning zippo. Not a pretty picture.

This board is nothing is not repetitious so here i go again: millions of boomers have lost a lot of home equity, lost a lot in 401k, have no pension, are addicted to frivolous consumption (cruises and SUVs for the kids), and haven't woken up to the fact that you need really high real interest rates (which we don't have, at least now), to live off of unless you have huge savings, which most don't have.

What about Principal-Protected Notes based upon the Euro due in the next 2 years?
I was considering this investment more than 2 years ago, I have just found the old offering summary that I could not even remember.
However this was not FDIC Insured.
May be there are better Principal-Protected Notes, but I will look into this.

The government is playing a game of chicken with investors, trying to coax them into riskier investments(not be confused with the other game where savers subsidize the banks). The low level of interest rates looks unsustainable however. Only a matter of time before interest rates explode on the upside. Government has too much debt they need to refinance.

The problem with principal protected (at least as hawked by my former employer) is that the call option on equities are purchased with the foregone interest, and interest rates are so low you will not get much upside on this product now, i.e., low interest rates means less premium purchase money. Moreover, this kind of product is often a total rip-off in terms of the way it is priced to retail investors.

and looking better at the principal protected investments it appears that principal is not really protected.. the issuer is also the guarantor!

I like the idea of investing in the Euro/S exchange rat,e but I am looking for real principal
protection. The return they were offering was:
Absolute Currency Return Percentage: (Ending Exchange Rate - Starting Exchange Rate)/Starting Exchange Rate
Issued on September 2007, Note due on September 2009.

I still think that if there are no rip-offs like you suggest (jimstreeteasy) it could be an interesting investment, provided that principal is really protected since I don't see how the exchange rate Euro/Dollar is not going to change in the next 2 years, I don't care about the direction of the movement.

Very good point about the issuer being the guarantor. When you look at the yield offered it is well below what the credit should offer. Brilliant marketing and kudos to the creator of this product!.

other risk factors:
- secondary market for the notes is not liquid
- resale value if you have to sell notes before maturity could be significantly lower than your initial investment since linked also to the issuer perceived creditworthiness.
- tax treatment: you are required to include original issue discount for US federal income tax purposes in gross income ... even though you will receive no payment on the noted prior to maturity (no periodic payments).

In my case the per annum return on the notes would have been approx 3.6% (7.2% total), but I don't know after taxes and bank fees.

There are zillions of variations on "principal protected". Yes, look at who "guarantees" the principal. Also, consider the tenor, because this investment is paid for through foregone interest (there is no free lunch), and do you really want to earn zero if the index whatever it it doesn't pay off. Any sophisticated investor (which doesn't include me) can replicate many of these things by using zero coupon bonds and buying options, etc..

"yes I am ready to accept more risk, still a low risk but more risk and that's my dilemma, it seems that you have to go from no risk to high risk."

Highend, this is a strange statement. Between holding all-cash and all-stocks (a proxy for "risky investment") there are an infinite number of options for dialing in your risk: e.g., 70% cash, 30% stocks. If you are looking for a low risk profile, remember that you can mix in high-risk options offset with cash alongside with your fully-invested low-risk options.

inonada: yes you are right, but I tend to be very conservative and even if I invest only 30% of my money and keep the rest 70% cash, I don't want to invest that 30% in high risk options. I know, I am not really a good investor.

highen...after a decade of FLAT equity returns, it is the people with the 70% in equitie mantra have the explainging to do, not the people in cash !

Jim, that decade of flat returns started with the silliest equity bubble this country probably ever had; there have been a few points this past decade where getting into equities has not been bad, and one point which I think is the cheapest point any of us will see in our lifetimes (March of this past year). I wish more such opportunities come up because as time goes on I get more discretionary cash to invest, but I'm not hopeful. The fact that equities are flat a decade after our biggest bubble ever separately followe by the second worse downturn in modern history is a real testament to the risk premium in equities. In any case, the past decade's true winner has been bonds (or perhaps commodities), not cash.

Just need to take a look at the libor forward curve to see where the market believes interest rates are headed. If you lock in a low rate now, just realize you are making a more bearish bet than the market. Why not accept another year of low rates and keep your options open?

Inonada. Agreed. Diversification is the key , as they say, but mostly I now recoil at the idea popularized in tons of books, and by Vanguard specifically, that you set some allocation, buy a bunch of indexes, and never change except to re-balance -- given that the allocations were so heavily equity oriented in all books, that basically hooks you to whatever bubblee comes along. I'm a lousy investor, and I'm not sure what the magical answer is, but permanent allocations ala 70 in equity, is not for me.

Rhino, explain to us a cap rate.