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In your quest for safety, here's what to consider

- Alan Lavine and Gail Liberman

Once you invest in something that lacks a direct government guarantee, it's up to you to evaluate the strength of the company backing your investment. This includes investments in mutual funds. You need to decide whether the potential reward is worth the risk.

Here are some points to consider:

  • Anytime you are not buying an investment directly from its source, scrutinize the intermediary involved, and any guarantees behind it.

  • Check newspapers and online message boards. Be wary of companies or investments that have been touted as having problems.

  • Don't invest in anything you don't understand. Know how much the price of your investment can fluctuate.

  • Insured municipal bonds yield about one quarter of one percent less than uninsured bonds. Nevertheless, the slight rate difference may be worth the added peace of mind. Municipal bond insurance companies recently have come under financial pressure. But they have beefed up their capital reserves to cover potential defaults. Historically since the 1960s, the default rate on insured municipal bonds is less than one-half-of-one-percent of all issuers, according to Standard & Poor's.

  • The financially strongest insurance companies carry A++ and A+ ratings by A.M. Best.


    Spouses Gail Liberman and Alan Lavine are syndicated columnists. You can purchase Alan Lavine & Gail Liberman's latest book Quick Steps to Financial Stability (QUE Publishing 2006) online at www.moneycouple.com or at your local bookstore. E-mail them at MWliblav@aol.com.

    To read more columns, please visit the column archive.

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