5 Places To Hide Your Money

1. Savings account or CD

If you have cash set aside that you will need for expenses anytime in the next 12 months, the stock market is not the place to hide your money. The market has been experiencing unprecedented levels of volatility recently, so now is not the time to see if you can double the kid’s college savings before he or she enrolls in the fall.

Your move here is pretty straightforward. You are probably best served by putting your money into a savings account or CD (Certificate of Deposit). Presently, savings accounts from ING Direct have an annual percentage yield of 2.75%. If you do a Google search on “CD rates,” you will see that you can find numerous institutions that will pay you between 4% and 5% on a 12-month CD.

2. Exchange traded funds

If you aren’t going to need your money for at least three to five years, the stock market is not a bad way to build wealth. Exchange traded funds (ETF) are an easy way for individual investors to create a diversified portfolio. Buying an ETF is similar to buying a stock, except that an ETF tracks an index such as the Dow Jones or the S&P 500. It gives you instant diversity. If you open an account with a discount broker such as Zecco, Marsco, TradeKing or Scottrade, you will be able to buy ETFs for only a few dollars per trade. After making a deposit into your brokerage account, look to purchase shares of the iShares S&P 500 Index Fund (Ticker: IVV). This ETF will give you broad exposure to 500 large cap stocks.

Aim to make purchases of equal dollar amounts on a monthly basis over the course of the year. This approach will smooth out the market’s peaks and valleys and ensure that you don’t put all of your money in at the market’s top.

3. Corporate bonds

Another option that carries less risk would be to purchase shares of the iShares iBoxx Investment Grade Corporate Bond Fund (Ticker: LQD). This fund is also an ETF that will give you broad exposure to the corporate debt of close to 100 large corporations such as Wal-Mart Stores, Johnson & Johnson, IBM, and Time Warner.
This ETF pays dividends on a monthly basis and its yield is currently 6.5%. This option is more conservative than investing in the S&P 500 and lacks the upside potential of an investment in stocks.

4. Target-date ETFs

If you are looking for a place to put your money for retirement and don’t want to constantly worry about it being properly allocated, target-date ETFs might be the perfect answer. Target-date ETFs allocate your money between both stocks and fixed income. The funds are more aggressive for those who have a while until they retire and they automatically adjust as one approaches retirement.

For instance, if you were looking to retire in 2030, you could invest your money in the TDX Independence 2030 ETF (Ticker: TDN) and your money would be allocated with that end date in mind. This option is an easy, low-maintenance approach to investing for retirement. You are essentially investing on autopilot.

5. Mutual funds

Another common approach to achieving a diverse portfolio is to invest in mutual funds. Mutual funds give you exposure to a number of companies and are actively managed by a portfolio manager as opposed to just tracking an index. Mutual funds typically have higher expense ratios than ETFs and established minimum investment amounts.

If you are looking at mutual funds, check out the CGM Realty Fund (CGMRX) and the CGM Focus Fund (CGMRX). Both funds are managed by investing legend Ken Heebner. In the time period from 2003 to 2007, the Realty Fund had annual returns of 89.7%, 35.5%, 27.0%, 29.0%, and 34.4%. You can dodge paying a commission to a broker to invest in these funds by going directly through the CGM Funds website.