Alternative Ways To Invest

The stock market is crazy, up and down. Are you making or losing money? Do you buy, or do you sell?

CBS News 'This Morning' Co-Anchor Mark McEwen talked to Peter Finch, executive editor of Smart Money Magazine, to find alternatives to stock market investments.

Even with Tuesday's rally, the Dow is still down 1,510 points (or 16.2 percent) from this past July's high. This means that investors in total have suffered losses on paper of $2 trillion in just six weeks' time.

So, besides the stock market, where can you invest?

• Bonds. Finch explains that bonds are like "an IOU from a company or government." You give them money, and they promise to return your money over a set period of time, with interest.

  "Bonds are less volatile than stocks," says Finch. "They are less risky over time than just putting money in the stock market."

  For example, someone who invested in bonds in March 1997 could have gotten a 25 percent return. That's better than you would have done in the stock market. As boring as bonds may be, says Finch, they are a safe investment.

  On the downside, you don't have nearly as much potential for return over the long term.

• Certificates of Deposit (CDs): Here, says Finch, there is no volatility at all. CDs are bought at a bank or a savings and loan, and those who buy them are setting aside some money for a certain period of time. In return, you get interest on it, in the range of 5 percent to 5 1/4 percent.

  The problem with CDs, says Finch, is that they lock your money down for a fixed amount of time, and they don't pay much.

• Money Markets are a little bit better than CDs. They afford investors the flexibility to move their money in and out as they please.
• Savings Accounts. With inflation taken into account, says Finch, you are probably only gaining about a 2 percent yield.

  "The great thing about it is just the simplicity. You can put the money in any time you want, take the money out anytime you want. There are few restrictions. Naturally, everybody should have some money in a savings account," says Finch.

• Real Estate. Like collectibles, the value of real estate is somewhat tied up to the economy and the state of the stock market. Some areas will be harder hit than others with the ebb and flow of Wall Street, but on the whole, Finch says real estate investing is usually pretty good.
• Finch's Favorite low-risk options are "loan participation funds, short-term bonds, and, for people in higher tax brackets, municipal bond funds make sense."