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I have a question about saving money and investing.
I currently have a saving account with Bank of America. As everyone knows, bank interest rate is so low, and I have been considering transferring the money on my BoA saving account into somewhere. I heard that CDs are better, however, some people also say that bonds are much better than CDs. So, I am really confused. The total amount of money on the saving account is around $35,000, and I'm sure I won't use them at all for the next five years. What do you think would be the best way for me to increase my money without a high risk? I would appreciate if you could give me any advice. As you can imagine, I am an absolute beginner, so I would appreciate if you could explain in plain words. Thank you.

Answer
Hi. This is a difficult question to answer in a forum such as this since the right way to invest is different for each person, based on their unqiue circumstances, risk tolerance and goals. Although CDs are a very low risk investment, it comes at a cost right now of the return being low. Conversely, bonds (or specifically bond funds) will offer a higher level income, this comes at the cost of the possibility of loss of principal if interest rates go up, which they eventually will. For a 5 yr time horizon, it is a difficult decision to make. What's more important to you; a guaranteed protection of your principal or the chance to make a little more money? That is the question that you need to be able to answer. Once you have done so, I would visit www.vanguard.com. Go to the personal investors section of their website and go to the planning/education tab. There is good info here that should help you decide. I hope this helps.

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John D Smith, CFP

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I can answer detailed questions regarding mutual fund investing, retirement planning, education planning and related comprehensive wealth management and investment concerns.

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