Transcripts

"Money File"- In Search of Higher Yields

SUSIE GHARIB: In tonight's "Money File," where to find the best investment depends on what you are looking for. Here's Eric Schurenberg, managing editor of Money magazine.

ERIC SCHURENBERG, MANAGING EDITOR, MONEY MAGAZINE: A good yield is hard to find these days. Money market accounts are averaging about 3.7 percent, and you hardly get any extra income for taking extra risk by investing in longer-term bonds, for example, or even junk bonds. So, what do you do?

Well, first, remember it is more important to pick an investment that suits your needs than to get one with a big number in front of the percent sign. Keep that in mind and you will do fine.

So what if what you need is an ultra-safe place to stash cash temporarily? Well, there is lots of choice. A number of banks, especially small regionals and online newcomers, are promoting high rates to get new customers.

Plug "highest-yielding money market accounts" into a search engine today, and you may find a dozen local and online banks offering 5.1 percent or better. Or visit Money magazine's Web site, money.com, for a list of the best money market accounts.

Now if you are talking about the longer term, say, the income portion of your retirement fund, it gets a bit more complicated. You have to take some risk to keep ahead of inflation, which means you need to keep most of your retirement money in stocks for growth.

For the income portion of that portfolio, which is what we are talking about today, you want a mix of stability, high-yield and growing income. So I would recommend a blend of bond index mutual funds, high-yield bond funds, and equity funds that invest in high-dividend stocks, all with low expenses, seasoned managers and consistent track records.

Many Web sites will let you screen for funds like that, or you can find a list of them on Money's Web site, money.com. Good hunting.

I'm Eric Schurenberg.