Expert: Gina Boykin - 1/28/2008

Question
MY HUSBAND AND I HAVE $40,000 THAT WE WOULD LIKE TO INVEST SOMEWHERE FOR 5 YEARS.  OTHER THAN A CD, WHAT OTHER OPTIONS ARE THERE?  WE ARE NOT RETIRING AFTER THIS 5 YEARS BUT WOULD LIKE TO INVEST THIS AMOUNT HOPING TO SEE A GOOD RETURN.
IS THIS POSSIBLE?
THANKS

Answer
If you'd like a better return than a CD, you can look into purchasing bonds.  Bonds provide income (like a CD), usually at a higher interest rate.  Bonds are basically debt - companies, governments, and schools issue bonds to fund a project.  When you purchase a bond, you are giving the company/government/school money to use now.  You are paid interest (usually semi-annually) until the term ends.  At the end of the term (maturity date), you receive your money back (which is called principal).  I can't explain all of the specifics here.  There is a lot of information on the internet about bonds.

Purchasing bonds will need to be done through a broker.  The major companies that you would use to purchase stocks or mutual funds (Vanguard, Fidelity, ETrade, Charles Schwabb, etc) also sell bonds.

You can also invest in stock or bond funds, by investing in mutual funds.  In general, mutual funds provide a higher rate of return when you look at a long period of time (at least 5 years, preferably 10 or more).  If you want to avoid doing a lot of research, index funds are the lowest cost mutual funds and do just as well as many higher cost mutual funds.

For more information on bonds, visit www.investinginbonds.com

For more information on index funds and other types of mutual funds, you can visit any website of the brokers I listed above, or www.investopedia.com.