Magazine article Medical Economics

Money Management Q&A

Magazine article Medical Economics

Money Management Q&A

Article excerpt

A good time to invest with foreign banks?

Q: In these difficult economic times, is it wise to have some resources located in a bank account outside of the United States?

A: Thanks to years of spy movies, Swiss bank accounts have long been viewed as the investment of choice for the rich, powerful, and sometimes criminal. Swiss accounts became fashionable thanks to a 1930s law that prohibits Swiss bankers from divulging information about their accounts or account holders - but that law quickly becomes meaningless if the account holder is suspected of criminal activity. For virtually all American investors, the federal government's newly granted authority to insure U.S. bank accounts up to $250,000 makes Swiss and other international accounts a less attractive option. If you aim to steer clear of the faltering U.S. economy, international stocks and mutual funds are a much simpler route to take. Just remember: The economic downturn is not unique to the U.S.


Q: I I'm considering an investment in convertible bonds. What are the risk-reward tradeoffs associated with these bonds?

A: Investors who think they're getting the best of both worlds with a convertible bond should be wary. It's true that convertible bonds may be converted to stock for a fee, often at the bond holder's discretion, but there are drawbacks associated with this type of investment First because they can be converted into stock, convertible bonds generally offer a lower rate of return than typical corporate bonds. So if the stock price doesn't rise, you're stuck with a bond that offers inferior returns. Further, most companies that issue convertible bonds have the right to "call" them at any time, meaning that the company can force you to convert the bond into stock. A company may do this when its stock price is higher than the bond's conversion price.


Q: I am 77 and have been retired 25 years. …

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