Achieving High Returns Safely

By Azhar ul Haque Sario

"Achieving High Returns Safely" sets out to dismantle the age-old belief that high returns always come with high risks. The author presents an alternative financial path using best-kept secrets of finance - money market instruments which are low-risk yet potentially highly rewarding. 

The content is exhaustive and easy-to-digest, developed to enlighten both seasoned investors aiming for portfolio diversity, and rookies stepping into the daunting world of investments. Behind each of the book's 35 chapters embedded is a route to financial wellness and growth provided you absorb lessons on a unique money market instrument each - its definition, applications, how it can enhance overall returns, and more importantly, what aspects to be wary of, all are covered. 

Both renowned instruments like T-bills, Certificates of Deposit, federal funds, and unheralded yet remarkably reward-laden money market tools such as Eurodollar Deposits, Treasury Inflation-Protected Securities are unfurled; prepared to spring a wealth-preserving surprise. Earmarked also are the Specialised Entities Such As Auction Rate Securities, Bank Guarantees, MMFs, making the available money-market palette as broad as possible. 

Towards the end, we weave through collateralised certificates of deposit, short term mortgage-backed securities, a universe of treasury notes and securities, and money market deposit accounts, extending your financial knowledgeable horizon. You contrast each of these diverse tools and pinpoint which align best with your return expectations, risk tolerance, and capital availability. 

• Language: English
• Publisher: Azhar ul Haque Sario
• Release date: Sep 5, 2023
• ISBN: 9798223232551

Azhar ul Haque Sario

Hello, my name is Azhar ul Haque Sario, and I am excited to introduce myself to you. I have a strong educational background, having studied O and A levels before pursuing an MBA. I am also a certified project manager and hold Google certifications in digital marketing and e-commerce. Aside from my professional experience, I am also passionate about investing. As an investor, I have developed a keen eye for spotting profitable opportunities and have a track record of making sound investment decisions. I believe that investing is an essential component of building long-term wealth and financial security, and I am committed to helping others achieve their investment goals as well. In my free time, I love sharing my insights and knowledge with others. You can find me posting daily articles on my LinkedIn profile, where I share tips and advice on everything from investing to marketing and beyond. I am always looking for ways to learn, grow, and make a positive impact, and I look forward to connecting with you soon.

Book preview

Achieving High Returns Safely  

Leveraging Low-Risk Money Market Instruments for High Returns

Azhar ul Haque Sario

Azhar ul Haque Sario

Copyright © 2023 Azhar ul Haque Sario

Copyright © 2023 by Azhar ul Haque Sario

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the author.

Published by Azhar ul Haque Sario

[e-mail]

Contents

Title Page

Copyright

T-bills: Applications & Benefits

Certificates of Deposit: Applications & Benefits

Commercial Paper: Applications & Benefits

Repurchase Agreements: Applications & Benefits

Banker’s Acceptances: Applications & Benefits

Treasury Inflation-Protected Securities: Applications & Benefits

MMFs: Applications & Benefits

Federal Funds and Investments: Applications & Benefits

Municipal Notes: Applications & Benefits

Eurodollar Deposits: Applications & Benefits

Treasury Notes: Applications & Benefits

Asset-Backed Commercial Paper Investments: Applications & Benefits

Floating Rate Notes: Applications & Benefits

Short-Term Corporate Bonds: Applications & Benefits

Auction Rate Securities: Applications & Benefits

Bank Bills: Applications & Benefits

Negotiable Certificates of Deposit: Applications & Benefits

Overnight Indexed Swaps: Applications & Benefits

Promissory Notes: Applications & Benefits

Call Money: Applications & Benefits

Commercial Bills: Applications & Benefits

Time Deposits: Applications & Benefits

Short-Term Government Bonds: Applications & Benefits

Treasury Bonds: Applications & Benefits

Banker’s Certificates: Applications & Benefits

Short-Term Municipal Bonds: Applications & Benefits

Variable Rate Demand Notes: Applications & Benefits

Adjustable Rate Certificates of Deposit: Applications & Benefits

Foreign Exchange Swaps: Applications & Benefits

Short-Term Treasury Securities: Applications & Benefits

Bank Guarantees: Applications and Benefits

Reverse Repos: Applications & Benefits

Short-Term Investment Funds: Applications & Benefits

Money Market Deposit Accounts: Applications & Benefits

Collateralized Certificates of Deposit: Applications & Benefits

Short-Term Mortgage-Backed Securities: Applications & Benefits

About The Author

T-bills: Applications & Benefits

T-bills, which are also referred to as Treasury bills, are debt securities issued by the government with short-term maturities. They are a reliable and safe form of investment that can be used to diversify your portfolio and stabilise your returns. This is because, unlike stocks or mutual funds, they offer a fixed return and are backed by the government, making them a low-risk option.

T-bills are essentially a promise by the government to pay back the buyer after a certain period, typically ranging from a few weeks to a year. The buyer purchases the T-bill at a discount from the face value, which is the amount they will receive upon its maturity. The difference between the purchase price and the face value is the investor’s return on investment.

For example, if you buy a T-bill with a face value of $1000 at a price of $900, you will receive $1000 at the end of the term, making your return $100. This is a simplified example, but it gives you an idea of how T-bills work.

One of the main advantages of T-bills is their liquidity. They can easily be sold in the secondary market, providing quick access to cash if needed. This makes them an attractive option for investors looking to balance out riskier investments or for those who might need to access their funds on short notice.

Now, let’s delve into the applications of T-bills. They play a crucial role in the financial system, serving as a tool for the government to manage short-term liquidity. By issuing T-bills, the government can raise funds to cover budget deficits or finance public projects. This makes T-bills a critical component of fiscal policy.

For individual investors, T-bills serve as a low-risk, stable investment. If you’re a conservative investor looking for a safe place to park your money, T-bills can be an excellent choice. Not only do they offer guaranteed returns, but they also provide a hedge against market volatility.

The use of T-bills isn’t limited to individuals or the government. Financial institutions often hold T-bills as part of their reserve requirements. Since they are considered risk-free assets, holding them can enhance a bank’s financial stability and creditworthiness.

In terms of leveraging low-risk money market instruments for high returns, T-bills can be used strategically. Although the returns on T-bills are relatively low compared to riskier assets, their stability and liquidity can be leveraged to offset risk and improve the overall return of your portfolio.

For instance, if you have a portfolio heavily weighted towards stocks, incorporating T-bills can reduce the portfolio’s volatility. This way, even if the stock market takes a hit, the steady returns from the T-bills can help cushion the blow.

Similarly, T-bills can be used as a temporary investment during periods of market uncertainty. If you’re unsure of where the market is headed, parking your money in T-bills can help preserve your capital while still earning a modest return.

Applications

Emergency Fund: Treasury Bills can be used as a part of an emergency fund due to their low risk and easy liquidity. If an individual invests $10,000 in a six-month T-bill at an annual yield of 2%, they would earn about $100. The risk is very low as T-bills are backed by the U.S. government.

Short-Term Savings: T-bills can be used for short-term savings goals like a vacation or a car. For instance, if you invest $20,000 in a one-year T-bill at an annual yield of 2.5%, the return would be approximately $500. The risk is low as T-bills are considered one of the safest investments.

Retirement Savings: T-bills can be part of a diversified retirement portfolio. If an individual invests $50,000 in 5-year T-bills with a yield of 3%, the return would be $7,500. The risk is low but the return is also lower compared to other investments.

College Savings: T-bills can be used for college savings due to their safety and predictable returns. If you invest $100,000 in 10-year T-bills at 3.5%, the total return would be $35,000. The risk is low but the money is tied up for a longer period.

Hedge Against Stock Market Volatility: T-bills can act as a hedge against stock market volatility. If you invest $1,000 in a 3-month T-bill at 1.5%, the return would be around $3.75. The risk is low and provides stability to your portfolio.

Cash Management: Businesses can use T-bills for cash management. If a company invests $1 million in 3-month T-bills at 2%, the return would be approximately $5,000. The risk is low and provides a safe place to park excess cash.

Day Trading: Some traders use T-bills for day trading due to their liquidity and stable prices. However, the potential returns and risks depend on the trading strategy and market conditions.

Bond Laddering: T-bills can be used in a bond laddering strategy to enhance liquidity and returns. The potential returns and risks depend on the specific ladder strategy and the yield curve.

Inflation Protection: Some T-bills are inflation-protected, providing a hedge against rising prices. The potential returns and risks depend on the inflation rate and the real yield.

Currency Diversification: Foreign investors can use T-bills to diversify their currency exposure. The potential returns and risks depend on the exchange rate movements and the yield.

In general, T-bills provide safety, liquidity, and predictable returns. However, the returns are generally lower than riskier investments. The main risk is the opportunity cost of missing out on higher returns from other investments. In addition, there is a risk of negative real returns if the inflation rate is higher than the yield.

Certificates of Deposit: Applications & Benefits

Certificates of Deposit, or CDs, are a form of financial instrument that are typically offered by banks to their customers. They are a type of low-risk money market instrument that can potentially offer high returns if used correctly. CDs are essentially a type of savings account, but with a twist. Instead of allowing you to deposit and withdraw money at will, CDs lock your money for a certain period of time. This can range from a few months to several years.

In exchange for this agreement, the bank offers a higher interest rate than what is typically offered on savings accounts. This makes CDs an attractive option for people who have a lump sum of money that they are willing to part with for a certain period of time. The longer the term of the CD, the higher the interest rate is likely to be.

CDs are considered to be a low-risk financial instrument. This is because they are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per individual per bank. This means that even if the bank fails, your money is still safe. This makes CDs a popular choice for conservative investors who are looking for a safe place to park their money.

However, CDs do come with their downsides. The main drawback is that your money is locked away for the term of the CD. If you need to access it before the CD matures, you will likely face a penalty. The penalty can vary, but it’s typically a few months’ worth of interest. Therefore, it’s important to only invest money in a CD that you’re confident you won’t need for the term of the CD.

In terms of application, CDs can be used in a variety of ways. One of the most popular uses is for saving for a specific goal. For example, if you’re saving for a down payment on a house or for a big trip, you could put your money in a CD. The set term of the CD can help you stay disciplined and avoid dipping into your savings. Plus, the higher interest rate can help your money grow faster.

CDs can also be used as part of a larger investment strategy. For example, some investors use a strategy called CD laddering. This involves investing in multiple CDs with different maturity dates. This can provide a steady stream of income and also allows for some flexibility, as you’ll have CDs maturing at different times.

In analyzing and evaluating the application of CDs, it is clear that they can offer a number of