|  | | 2008 News and Press Releases | | |
HEADLINE NEWS:
Earning Extra Yield Can Be Precarious And Pricey
, Special to the Legal
William Z. Suplee IV
The Legal Intelligencer. April 29, 2008
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EXCERPT: Over the last several years, investors have earned slim returns for their short-term investments. Continuing turmoil in the financial marketplace has led the Federal Reserve Board to respond to each crisis by injecting liquidity into the system. This policy continually forces rates lower and makes it difficult for savers to earn much in the way of interest. In fact, current Treasury bill rates are at the lowest point in 50 years. Even banks are offering CD rates as low as 1 percent. With rates at a cyclical low, investors have been turning to less familiar investments in the hope of increasing the yield of their portfolios. Often, without realizing it, this reach for a little extra yield comes with a large amount of additional investment risk. During the last six months, two popular, commonly thought of as safe, investments have had unforeseen consequences for investors. Investors searching for extra yield were surprised when both short-term bond funds and auction rate securities punished investors who were not fully prepared for their risks. While these occurrences are decidedly unpleasant, they once again remind us that risk and return are related. In a competitive marketplace, the only way that one investment can pay significantly higher yields than a competitor is by taking on significantly more underlying risk.
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