“The interest is up and the stock market’s down and you only get mugged if you go downtown”

- from Hank Williams Jr., “COUNTRY BOY CAN SURVIVE”

These lyrics are only partially true as the interest rates are down as well as the stock market, and if you really want to get mugged go and see Bernie Madoff, he seems to be able to have put the skid row thugs to shame in the mugging dept. But like in every crisis there’s opportunity for those who know where to find it. Here’s a few ideas that you can use immediately for the time being.

DIVIDEND PAYING STOCKS

Stock prices high, dividend yields low, stock prices low, dividend yields high. Well I don’t think anyone would disagree that stock prices are definitely in the crapper, and will probably stay that way for at least the near future as it takes good news for Wall Street to feel the euphoria necessary to make stock prices rise again. This makes it an opportune time to go for stocks that kick off a nice dividend, after all, the people that still have jobs still hit the Golden Arches for their morning coffee and possibly a breakfast sandwich off the infamous “Dollar Menu.” Those hooked on their nicotine fix are not going to change because the economy is in dire straits. Both of the more popular stocks in these areas payout some cashola in the form of quarterly dividends while you’re waiting for the stock market to rise to its previously high levels. if you would like to leave picking individual stocks to the pros, you can still take advantage of this opportunity by purchasing one of the several Exchange Traded Funds (ETFs) that track a dividend based index. With ETFs you not only get the advantage of owning a variety of dividend paying stocks, you also get low internal expenses so you get to keep more of the dividends you earn by not having to pay as much as you would in a similar mutual fund. If you have a slightly stronger stomach, and don’t mind going outside the U.S., the international markets have also had a rough time as of late and there are international dividend ETFs that can satisfy this need while also keeping expenses low, but the international dividend ETFs expenses will typically be slightly higher than their domestic counterparts.

DISCLAIMER: EVEN WITH STOCKS PRICES BEING DOWN THEY CAN STILL GO LOWER. INVEST IN ANY STOCK, STOCK ETF OR STOCK FUND ONLY IF YOU CAN STOMACH RISK AND ONLY WITH MONEY YOU CAN AFFORD TO LOSE. STOCKS ARE NOT FDIC INSURED AND MAY LOSE VALUE.

MUNICPAL BONDS

With all of the money being poured into U.S. Treasury Securities (both bonds and bills) the yields on these instruments are at historically low levels. Municpal Bonds however aren’t directly correlated with Treasury Securities and thus are paying rather attractive yields currently. As with stocks, you can choose to purchase municipal bonds individually, but I don’t typically recommend you do this unless you know the municpal market very well, and you have alot of cash. A single municipal bond can be quite pricey, so getting good diversification may cost you many thousands of dollars to do right. Also, if you don’t know much about the issuer of the individual bonds it significantly increases the chances that you’ll make  bad choice. Just like above a municipal bond ETF or even a mutual fund would probably be the prudent avenue to take here. The ETF, as almost always,will have lower expenses than the mutual fund. I personally am sticking to short to medium duration bond ETFs as a sudden dramatic change in the interest rate picture could eliminate the opportunity here in a hurry.

DISCLAIMER NUMBER 2: BONDS, BOND ETFs, AND BOND MUTUAL FUNDS CAN FLUCTUATE IN VALUE THOUGH USUALLY NOT AS MUCH AS STOCKS. NONETHELESS, DON’T INVEST IN THESE VEHICLES EITHER IF YOU ARE RISK AVERSE OR CAN’T AFFORD TO LOSE MONEY AS THEY ARE ALSO NOT FDIC INSURED AND MAY LOSE VALUE, AS WELL AS THE ISSUER COULD DEFAULT ON YIELD PAYMENTS.

BANK CDs AND MONEY MARKET ACCOUNTS

In a deflationary environment a fixed rate of return on an FDIC insured vehicle is a nice thing to have, especially with money that will be needed immediately or in the very near term. While many local banks’ rates of return may not be very attractive, some of the online banks are offering  handsome rates of return on these vehicles since they are saving money by not having any or very few physical bank branches and the accompanying salaries, wages, and utility and upkeep expenses that go with them and passing those savings on to their customers in the form of higher rates. The online bank that I use  myself and with my clients allows you to link up the account at your local bank to the online bank account so you can switch money between the two if you feel comfortable maintaining your relationship with your local bank, but still would like the opportunity to earn the higher rates often offered by the online bank.

In closing, the aforementioned ideas are NOT meant as a substitute to a formal financial plan with defined strategies and objectives. I would strongly advise that you don’t shift all of your money to these vehicles as the opportunity that they are currently providing will more than likely NOT last forever therefore necessitating a change in the future. The intent is to provide some alternatives to having a all of your money sitting in a savings passbook earning a sub-1% interest rate because you think that there is nothing else out there attractive at the current time. Invest wisely, and good luck.