Wednesday, December 10, 2008

Zero Percent Interest and Burying Money

The loss of confidence in our financial systems is causing a lot of strange stuff to happen, including accepting no interest for lending to the government.

Treasury Yield Falls Below Zero As Investors Seek Safety by Reuters reports that the four week T-bills had a 0.000 percent interest at auction, for the first time since issuing the notes 2001, and the three month T-bills in the secondary market fell below zero.

Amazing... People are essentially paying the government to take their money. They might as well be stuffing their money under the mattress or burying it in the back yard.

As conservative investors, we have usually have 30 to 40 percent invested in fixed income, such FDIC insured CDs, municipal bonds and money markets, ranging from 3 to 5% yields. For now, I consider these fixed income investments safe enough, and don't think it is a good choice to go to zero percent interest investments for more safety.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial advice. Please consult a professional advisor.

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