Word: risklessness
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...is straightforward enough, even if few countries have ever had to deal with it on this scale before: thanks primarily to its thriving export industries, China has $1.4 trillion (and counting) in its pocket and has to put it somewhere. For years, the investment of choice has been the riskless solidity of U.S. Treasury bonds. But as the dollar drops and higher returns can be gained elsewhere, China has begun to eye more alluring places to stash some of its cash...
...RISKLESS? Money-market funds are the safe ways to get better-than-bank-account returns. Yet lots of them are stuffed with commercial paper--unsecured short-term IOUs. During the California energy crisis, utilities defaulted on that paper, prompting fund companies to eat the loss so their investors would not have to. Money funds hold $644 billion in such U.S. paper, says iMoneyNet.com but the risks remain small because the SEC prohibits a fund from investing more than 5% of its assets in the IOUS of a single company...
...penny shortage points up an important money lesson. The bank's offer of 55[cents] for 50 pennies constitutes a riskless 10% return. Sometimes it's the deal right in front of you that makes the most sense. Your 401(k) plan is one of those. Contribute enough to get the full company match. Of course, most investments require thought. And we'd have more time for that if we could just get rid of all those pennies. That's my 2[cents...
...investments can be characterized by two variables, in the same way you might categorize a person by his hair color and height: risk and reward. They tend to be proportional. If you want more reward, generally it means taking a bigger risk. Home mortgages, for example, are fairly riskless propositions for lenders, but the reward is tiny--perhaps 6% a year in interest payments. On the other hand, lending money to the government of Malaysia is fairly lucrative, but it is not an investment for the faint of heart--the double-digit interest rate brings with it risks...
...with large customer bases they will be able to offer infinitely complex (and incredibly efficient) wealth accounts to the average investor. But taking complex finance out of the hands of Wall Street rocket scientists and putting it into the hands of consumers or even inexperienced bankers is hardly a riskless activity. "Banks have been making less and less money from traditional lines of business," says Douglas Gale, an economics professor at New York University who is considered a leading thinker about next-generation finance. "What they have found lucrative is designing derivatives. But if you're using derivatives...