By Sarah Cole
During recessionary times when the GDP contracts, stock markets tend to go in tandem and drop in value. During years when the GDP grows, however, does not necessarily portend a rise in stock prices interestingly. In any case, the drop in stock equities causes many to scramble for new places to put their money. Preferably, these new investments should be low risk, no fee (such as no load index funds), and give high yield. It is not always possible to hit all three attributes so two out of three are acceptable to many.
As would be expected, high yield mutual funds are offered by regular physical and online brokerages. One point to note is that the low cost (sometimes known as no load) index funds spend as little money as possible on the talent of the fund manager, preferring instead to adhere to a trading philosophy guided more strictly by performance averages and historical yields. Loaded index funds work differently in that the manager makes many decisions buying, selling and holding a mix of stocks. The manager is usually compensated well.
The second place to look is a brokerage that offers exchange traded funds (ETFs). These are slightly different in structure but a few differences. One of them is that ETFs can be traded all day just like a stock on the exchange. They are also baskets of stocks that are indexed in some way, representing no load index funds. Furthermore, there are usually no minimums to buy ETFs unlike no load index mutual funds that sometimes have minimums in the tens of thousands of dollars.
Besides high yield mutual funds what are some other options for investors during such times?
Checking and savings accounts infrequently offer the best available yields encouraging investors to turn elsewhere. Undoubtedly investors will encounter the money market account that are similar to typical bank accounts but offer more lucrative rates. Investors who are concerned about the reliability of online banks should be comforted as long as the banking institution is licensed, it is insured by the FDIC in the event of a serious collapse. Money market accounts must not be confused with a money market fund which invests in a portfolio of such instruments, and accordingly are not federal government insured.
Investors may benefit from GNMA mutual funds. The partially-government owned organization Ginnie Mae is responsible for financing the housing loans of a safer subset of home buyers. In the time of the financial crisis perpetrated at least partly by the property meltdown of 2007, Freddie Mac and Fannie Mae fell victim to hemmorhaging drops in revenue forcing a declaration from the Treasury to prevent investor panic. GNMA funds discovered that it was in a much better condition, showing little sign of being in need of help. SEC rules still demand that GNMA-titled funds to contain more than 4/5ths of assets in GNMA-related securities.
If the government conducts its activities it needs to in some way finance the operations enough taxes are collected to reward employees. Temporarily obtaining money at these amounts is carried out with the help of the sale of bonds, which are basically IOUs by the government to pay back plus interest. The general masses buy into bonds for hitherto has been a highly ironclad promise of repayment and lack of default risk. No load index funds with bonds as the primary asset are available too.
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MLA Style Citation:
Cole, Sarah "High Yield And No Fee Funds." High Yield And No Fee Funds. 26 Jun. 2010. uberarticles.com. 8 Aug 2014 <http://uberarticles.com/finance/how-to-choose-low-fee-index-funds-with-high-returns/>.
APA Style Citation:
Cole, S (2010, June 26). High Yield And No Fee Funds. Retrieved August 8, 2014, from http://uberarticles.com/finance/how-to-choose-low-fee-index-funds-with-high-returns/
Chicago Style Citation:
Cole, Sarah "High Yield And No Fee Funds" uberarticles.com. http://uberarticles.com/finance/how-to-choose-low-fee-index-funds-with-high-returns/
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