Risk and trust are not complementary. After wandering on last week about the true meaning of risk-free returns and the difference between a risk-free investment and a risk premium, it is only fair that I try to give you a few ideas in finding investments that may return something above the low (and heading lower) savings rate.

Warning, there is risk in every investment we make, and even in the ones we do not. We do it without realising it, such as ignoring large sums of cash in a non-interest paying checking account. Every day for this lack of a decision is a decline in value for that money, every single day. It seems that this interest rate environment more and more resembles the last Bear market.

It will be a challenge to find good rates of return that are conservative, and low risk. One other point, people often assume that checking, savings, term deposits accounts are guaranteed and insured. In Bermuda, local financial institutions do not offer individual deposit account insurance, such as is common in the US Federal Deposit Insurance Corporation insures accounts at participating banking institutions for up to an estimated $130,000 per account.

Suggested strategies to achieve a more consistent higher rate of return.

1 Ladder your term deposits by separating the amounts into three months, six months, 12, two years, and five. As each deposit matures, try to invest the proceeds for the longest or highest amount possible. This will take discipline and time. As interest rates rise and fall you will be able to take advantage of the changes, helping your achieve a better than average overall rate

2 Consider buying local shares that pay consistent dividends. Typically, the dividends may return a yield of around 2.5 to three percent. To figure out the annual yield in percentage terms, divide the latest share price (or the price you originally paid) into the dollar amount of the dividend (do not forget to multiply times four for the total number of dividends paid in a year). Dividend yield is a math function, since the amount of the dividend is linked to each share; thus, high share price - low yield and vice versa, low share price-high yield.

3 Quite a few insurance companies have issued preferred shares that pay a higher dividend than current deposit account. Acting more like bonds, these investments come with their own set of risks. They do not significantly appreciate in value, but can fall far below par value if the underlying company common stock tanks. They can be called back, sometimes without notice, and in reorganisation/insolvency situation, you may only be paid a percentage of the original value.

4 For some new investors, this may be a significant step toward owning an equity portfolio. Currently, two institutions may have an advantageous custody arrangement if you buy their company stock direct from them. If you form a relationship with other financial firms, you will have a choice of opening an investment account, or paying extra to hold the shares in paper certificate form. Check carefully, though, because not all local shares may be offered in paper format as well as in electronic custody format. The investment firms may also required specific minimums to open an investment account.

As with all investments, you should never load up on one concentrated position. Do your best to be as diversified as possible.

• Money market funds should still be can be considered, too, even though their returns are only slightly above local rates. Money market funds are held in hard currencies. If you have ties to other countries, say your children attending school abroad, it may make sense to hold some of your savings in that currency, say pounds sterling which returns are greater yield than US dollars. Holding more than one currency increases your exposure to currency risk. If the dollars strengthens against your chosen currency, the value or rate of your foreign currency money fund may fall.

• There have been problems in capital markets due to sub-prime loans securitisations ending up as positions in some money funds, so you do need to ask questions now about how your money fund is structured.

How will you know if you are purchasing a high credit-worthy money fund? You can do it the long way, by obtaining (for free) and wading through the prospectus and the annual financial report. You would be amazed at what auditors of these financial statements must tell you about how the fund is constructed. Culling through an annual report dated April 2007 for a pound sterling money market fund - the brand name of this money market shall remain anonymous - I found the following very interesting facts.

Annual financial statement reports for any mutual fund are required to list all of the security positions held at that time and their market value. In the notes to the financial statements, all financial instruments and associated off-balance sheet risks must be detailed. This fund lists quite a few complex derivative investment vehicles, such as foreign and domestic options, forwards and future contracts and swap contracts. If you can explain these succinctly, you do not need to be reading this.

Money market funds are often made up of commercial paper, which www.investopedia.com categorises as unsecured, short-term debt instruments issued by a corporations, typically for the financing of accounts receivable, inventories and meeting short-term liabilities. Maturities on commercial paper rarely range any longer than 270 days. The debt is usually issued at a discount, reflecting prevailing market interest rates. Commercial paper is not usually backed by any form of collateral, so only firms with high-quality debt ratings will easily find buyers without having to offer a substantial discount (higher cost) for the debt issue.

In the list of commercial paper for this money fund, we see quite a few familiar names, Citigroup, GE Capital, Scotiabank, Barclays, JP Morgan, etc, all massive highly capitalised global banks. Along with that familiar group were the totally unfamiliar, such as Links Finance and Whistlejacket Capital. What are these securities and how do you find out about them?

Why type the names into Google, and cynically, can you guess what I found? Although stated in financial jargon, in plain language, these two names are structured investment vehicles (SIVs). It is therefore no surprise to then read that as of February 2008 of this year, they are on credit watch. I quote a bit of the news releases for both.

George Town, Grand Cayman, Cayman Islands: February 26, 2008 - "Links Finance Corporation (Links), a Cayman Islands based structured investment vehicle, announces that, in accordance with the terms and conditions of the capital notes and the terms of the proposed facility to be provided by BMO Financial Group (BMO), it will be obliged to cease, until further notice, payments on all classes of capital notes.

Whilst the terms of the facility are still being settled, Links understands that BMO's commitment to fund under the proposed facility will be conditional upon no payments being made to Capital Note holders.

The Links board also understands that in the absence of the facility the company's senior note ratings would be downgraded; resulting in a defeasance event or, possibly, an enforcement event,"

LONDON (Standard & Poor's) February 12, 2008 - Standard & Poor's Ratings Services today lowered its issuer credit rating on Whistlejacket Capital Ltd., the SIV that was created as a result of the merger of Whistlejacket Capital Ltd. and Whistlejacket Capital LLC.

Standard & Poor's also lowered its ratings on Whistlejacket's commercial paper (CP)and medium-term notes (MTN). In addition, we placed the issuer credit, CP, and MTN ratings on CreditWatch with negative implications.

What an incredible disappointment! That was then and this is now, almost a year later. It is assumed that all high quality money funds have divested themselves of these hard to value instruments to keep investor confidence comfortable.

When investing always ask questions so that you feel confident in the choices that you are making. In the end, it comes down to trust and transparency. Make all of us financial salespeople earn your trust.

Martha Harris Myron is a Senior Wealth Manager at Argus Financial Ltd. specialising in investment advisory services focused on capital preservation and comprehensive financial solutions for clients considering lifestyle transitions and rewarding retirements. Confidential email can be directed to marthamyron@northrock.bm or 294-5709.

The article expresses the opinion of the author alone. Under no circumstances is the content of this article to be taken as specific investment, legal, tax or financial planning advice, nor as a recommendation to buy/ sell any investment product. The Editor of the Royal Gazette has final right of approval over headlines, content, and length/brevity of article.