Stock Market Information

Unfortunately many investors tend to misjudge their appetite for risk until it’s too late. Many consumers will say that they’re willing to accept volatility, especially in the stock market, in good times. When the chips are down however and portfolio values drop 20% or more within the span of a few months, many investors balk and flee to the safety of other securities. Listed below are a few instruments that those looking for safety will flee to:

• Treasuries: Treasury notes and bills are debt securities provided by the US government, allowing Uncle Sam to borrow the money from investors with the promise to pay it back within a specified time frame. If you happen to bail out when everyone else is, you’ll see less interest being paid as more demand is present for the safety of government securities, as we see with our current economic scenario.
• High Yield Savings Accounts: Pioneered by banking institutions like ING, many banks now offer higher yield accounts for consumers to place emergency money that they may need. This allows them to earn some interest while also receiving FDIC insurance on their money and supreme liquidity. With the recent boost to FDIC coverage from $100,000 to $250,000, it’s likely that many more investors will flee to such accounts to wait out the market volatility.
• Certificates of Deposit: These are notes that banking institutions sell to customers in order for them to build a capital base and in exchange promise a specified rate of return to the consumer. These tend to pay higher interest due to the loss of liquidity, as certificates can not under most circumstances be easily converted back into cash until the specified time frame has expired.