In today’s economy, it seems like a lot of investments are risky with many companies reporting less than stellar returns. If you want to get started in investing but feel overwhelmed by the amount of decisions and other factors involved, then high yield mutual funds are an excellent choice even for those with little to no experience.

When the economy slows down and stock prices are going down, it makes sense to invest into stable industries that provide healthy dividends. Examples of mutual funds that pay high yields include utility companies as they are a fairly stable industry. Here are 5 tips to get you started.

1. Diversify – High yield mutual funds shouldn’t be your only investment as you also want to diversify into other holdings for reduced risk. You can literally find hundreds of different funds available that invest into specific assets ranging from only energy stocks to those that invest in large cap companies.

2. Risk factors involved – Keep in mind that high yield mutual funds also tend to be more aggressive so the fund may go down when the economy slows down or the company is unable to pay back its debts. Be sure to take risks factors into consideration before investing.

3. Use rating systems – Companies such as Morningstar use simple rating systems to rate individual funds based on a multitude of criteria. Be sure to thoroughly use these for your market research into how well a fund might perform in the future.

4. Decide on a load or no-load fund – Load funds charge a fee which is typically a percentage of your investment while no-load funds do not. Always try to find those do not charge a fee as this would mean a higher return on your investment.

5. Choose those that interest you – There are many different funds available for you to invest in and while you can choose the one that many recommend, choosing the one that interests you or that you are familiar with will enable you to make better decisions.

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Most people only think that they can make money when the stock market goes up or real estate prices go up, etc. However, if you know how to trade the markets properly then you can make money with falling prices. Not everyone can do this though, but it does not mean that you can not take some of the profits in a falling market. If you find a good performing hedge fund, then you can take advantage of some falling markets. Jon has written an article below about making profits from hedge funds.

Profits in Hedge Fund Investing

Most people understand what a mutual fund is and think a hedge fund investment is the same thing. They are correct in that a hedge fund is a group of investors that pool their money, just like a mutual fund. Hedge funds, however, don’t have the same type of regulation that the mutual fund has. In fact, you have to have a specific amount of wealth to invest in a hedge fund and a required amount of investment savvy. A hedge fund investment is not a public offering, but often a private limited partnership with the fund manager as the general partner.

Hedge funds do things because it is a private investment, which regular mutual funds can’t do. One example is the ability to sell short. This is a risky technique especially if it’s a naked short sale. The short sale is when you sell a stock in hopes of purchasing it later at a cheaper price to fill the sale.

A naked sale is one where you sell a stock you don’t own. To comply with government regulations you must be able to borrow it from someone before you sell it. The reason that it’s so risky is that the price could skyrocket after you sell the stock. Then you must pay huge amounts to fulfill your obligations to the buyer.

When large hedge funds use the techniques, often they drive the price down artificially in the sale of the stock and minutes later, can make a quick profit with the purchase and delivery of the cheaper stock. This is one way a hedge fund investment brings higher income than the traditional mutual fund.

The original purpose of a hedge fund was to hedge against the market’s swings. The combination of different types of investments provided an equation against falling markets. The change came as hedge funds became more popular. Today, they provide not just a hedge against loss but an edge for gain.

The typical hedge fund investment contains derivatives that are high yield and debt from companies considered risks, so they have to pay more to borrow, or their loans sell at discounted rates which means the yield on the return is higher. If you use a $1,000 loan as an example, with the company loan rate at 8%, that is a decent comfortable return. Now, if that same company gets behind on the loan and the lending institution panics, they might sell it at a 50 percent reduction of the balance to the hedge fund. This in effect means that not only does the fund get 16 percent interest, but if the company actually pays the loan in full, they make a 100 percent gain on that money.

If you have plenty of money already, you may be the perfect candidate for a hedge fund investment. These types of investments are supplementary to normal investments. They attempt to defeat bear markets and bring in money while they also take advantage of the bull market and yield a higher return. There are risks in a hedge fund, ones that the average investor would never take. With the onset of a bear market, the technique of short selling is one of the best ways to hedge the bad market and take the lemon that the economy handed you and make lemonade.

Relative to the typical returns on growth-oriented investments, such as stocks, the interest rate (also known as the yield) paid on savings and money market accounts, is low but does not fluctuate as much over time.

Bank savings accounts are backed by the federal government through Federal Deposit Insurance Corporation (FDIC) insurance.  If the bank goes broke, you still get your money back (up to $100,000).  Money market funds are not insured.  Should you prefer a bank account because your investment (your principal) is insured?  No.  Savings accounts and money market funds have almost equivalent safety, but money market funds tend to offer higher yields.

Because forex trading is such a complicated business, there are many systems in place to help new or cautious traders get involved without going bankrupt. There are mini accounts that let you invest only small amounts of money, and there are even automated accounts that let a computer program do it all for you. And in between those extremes is the managed forex account, which gives you full access to the market but gives you an adviser to help you navigate it.

A managed forex account is perfect for someone with no experience, or limited experience, in the forex market. It’s also good for someone who wants to invest but doesn’t want to go through all the studying and training necessary to do a good job of it himself. Furthermore, a managed account is a godsend if you want to invest but simply don’t have the time or the inclination to watch the market 24 hours a day.

Managed accounts always require a minimum investment of at least $10,000, and some have the minimum set as high as $250,000. This makes it off-limits to many individuals, especially considering you never want to invest more than you can afford to lose. It is mostly businesses and corporations that use managed accounts, though more and more well-heeled individuals are taking advantage of it in the 21st century.

The reason for the high minimum investment is that a managed account has to have someone managing it — an actual human being, that is, not a computer program. If the minimum investment were more reasonable, too many people would want managed accounts, and the managers wouldn’t be able to handle their client load. Having said that, you can enter a quality managed account through Landau Securities for a low entry point by using a life bond.

In general, a managed account is best for long-term investors. Someone wanting to get into the forex market, make a lot of money through aggressive, risky ventures, then get out again, would not benefit from a managed account. Most managers favor a conservative, slow-growth strategy, usually suggesting that investors stay with the program for two years to show real profits. (Most systems let you withdraw your money and quit whenever you want, though, with no penalties for doing so.)

There is a fee for managed accounts, of course; nothing comes for free. Usually the fee is based on the performance of the market, with the manager taking a percentage of your net profits each quarter. This fee is well worth it for many individuals, though, as they find a managed account gives them peace of mind with regard to where their money is being invested and what kind of return it’s yielding them.

James writes an article about recession proof investing, but I would have a different approach. I would always invest in mutual funds that make money whether the markets are going up, down or sideways. They are funds that deal in futures, currencies or other derivatives. Trading can be very lucrative during the onset of the recession, as the market can fall very quickly allowing for many good “short” profits to be made.  If you are not confident of trading though, then having some of your portfolio in mutual funds that invest in derivatives is the way to go. I invest in these types of funds via overseas investments.

Recession Proof Investing – Where to Make Money in a Recession

Investments in developing countries, such as China, India and Russia have been very profitable over the decade. Rodrigo wrote the article below and he seems to think that this will still be the case for the 21st century. I definitely have investments in China, Russia and India through Landau Securities.

The Countries of the Future, Or Where to Invest and Make Money!

The United States has experienced significant growth rates in the last 150 years. Over this period, America has gone from a small farming economy to the greatest power in the globe, with significant gains for its citizens in quality of life. Today, the average American family has too many cars, TVs, computers, and a huge amount of debt!!! How much more can they still continue to buy? To whom are companies selling their products?

Business owners have realized this problem years ago, and therefore “globalization” was created. Well, not exactly created, but 20 years ago the American government, supported by its largest corporations, started to push the concept of “open markets” into developing countries. The idea, as said, was that poor countries should be selling metals, oil and food to industrial countries, who would process these materials and, in return, sell back industrial products to the poor countries, which required significant capital and skilled labor (at much, much higher prices by the way). This way, American companies could benefit from the enormous consumer markets available in developing countries. Oh, almost forgot: many of the products that poor countries could produce, like food, would not be able to be sold in the United States, not to displease some of the voters (called farmers) of the government.

As things progressed, American companies realized that if the U.S. would let commodities come in, why not take advantage also of much cheaper labor prices in these countries and relocate the manufacturing operations of some of the factories they did not want, like coal and steel? This way these companies could make much more money selling to the same crowed!!! Later on, as workers were also trained on other types of jobs, other industries also relocated to countries like China, Malaysia, Indonesia, Vietnam and Korea.

But the U.S. still had services businesses to generate jobs … until the internet made it much easier to provide services online and countries like India and even Ireland took part of that cake too.

But what do countries like Brazil, Russia, India and China have in common and why is so many people talking about them? And what does that has to do with the story above?

These countries have a large population, underserved, eager to buy, eager to increase their quality of life. And with more jobs relocating from industrial to developing countries, they now have the means to buy more stuff.

The countries that will be able to sustain high and consistent growth rates over the next decades will be these same countries with big domestic consumer markets. China growing in manufacturing, India in services, and Russia and Brazil producing the resources that the new world needs to grow. This is the new order of the 21st century. And where there is a market, there are companies willing to serve it.

If you want to invest in companies that will sell more, make more money, grow faster, you have to invest in companies that are selling to these markets, to these consumers.

Brazil is a democracy, de-regulated market, a peaceful country, no meaningful natural disasters, no ethnic or religious tensions, and rich in natural resources. It is a country that experienced significant progress in the last decade, and yet has a lot to come. If you pick the right industries, the right companies and the right investments, your returns can be very, very significant.

1. Mutual funds allow you to diversify your investments, that is, invest in many different industries and companies instead of in just one or two.  By spreading the risk over a number of different securities representing many different industries and companies, mutual funds lessen your portfolio’s volatility and the chances of a large loss.

2. Mutual funds enable you to give your money to the best money managers in the world, some of the same folks who manage money for the already rich and famous.

3. Mutual funds are the ultimate couch potato Investment!  However, unlike staying home and watching the TV or playing Nintendo, investing in mutual funds can pay you big rewards.

4. You can use mutual funds to invest in specialized areas, such as currency funds, futures funds and offshore markets (such as China, India and Russia). Many people would not have a clue as to what to invest in within these areas, but great returns can be made with the better managers.

While mutual funds can be good, there are many out there that give very low returns.  In some cases, the managers do not have that much incentive to perform well, so the fund has low returns. Banks try to get you into some of their managed funds, but their main concern is getting the fees from you while they invest offshore with your money and make greater returns. I would stay clear of managed funds through banks. You need to do some research into the fund that you are interested in before you take the plunge.  How has that fund performed in the past and what is the fee structure?  Is there an incentive for the managers to make the fund perform? Also, some of  the better mutual funds require a substantial amount of finances before you qualify to participate in them.

I personally have invested in mutual funds through  Landau Securities.  I found that they were a great source to invest in mutual funds because they provided the means to invest in funds that were run by the best managers in the world. Most of these managers operate in tax havens, but I shall talk about this in more details in another post. They also had life bond options, which allowed members to participate in a variety of high quality funds without having to qualify for the large entry fees.