In last weeks post, we discussed investing in the Money Market and hopefully you’ve been learning a lot from our recent series intended to introduce you to all the other types of investment opportunities out there besides just investing in stocks.
The more options you’re aware of when it comes to investing your money, the wiser the decisions that you can make, and that leads to a happier, more secure future.
Talking Mortgage Backed Securities
Today we’re going to be talking about Mortgage Backed Securities. To put it simply, a mortgage backed security refers to an investment plan whereby you loan money to a homeowner or more frequently, to a corporation, with the promise that you are then entitled to a percentage of the interest that they are obligated to pay on their mortgage.
This is a type of investment that many banks are keen on making, because it allows them to act as a middle man, so to speak, without the responsibility of handling funds directly themselves.
Mortgage Backed Securities are usually secured by government institutions, so there is a minimal risk involved in their buying and selling. They are considered to be a very safe investment for the most part, with a payoff that is actually slightly better than that of treasuries, another popular option.
Monthly Income
Mortgage backed securities are a popular form of investment for those who want to be able to draw a monthly income from their investments, rather than selling for a lump sum of value. The amount of the monthly payment received is usually directly in line with the present interest rates driving the market.
The only drawback to Mortgage Backed Securities is simple: mortgages are expensive. That means that these securities are usually traded in large denominations, sometimes only going as low as 25,000 dollars a share. However, much like money market funds, there are some collaborative efforts available to allow amateur investors to get into mortgage backed securities. If you’re interested, it’s best to start out with these.
See you next week for part 10 of Investments.
Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 – 2009
{ 2 comments… read them below or add one }
Hi Sean,
Mortgage backed securities sound look a good idea but they look like they’re really expensive to get into. They seem like a pretty low risk, safe investment as far as investing goes.
I think I’d start elsewhere though. Mortgage backed securities look like something I’d work up to.
Once again mortgage backed securities are interesting to learn about, however I wouldn’t outlay that amount of money on one stock. I would rather diversify and spread the risk.