The term guaranteed investments raises a few questions about what the words actually mean. Guaranteed means assured or certain. Investments mean taking a financial position in a product, and in this case being assured, (guaranteed) of a return on that investment.
The question is always what kind of a return is guaranteed ? In the financial arena a guaranteed investment would include products such as municipal and government bonds, commercial paper, collateralize loans. Instruments where a return can be "guaranteed".
These investments are, by nature, secure. They are backed by borrowers who can assure the investor that a certain return will be paid at a certain date. A U.S. govt. bond is a good example. The buyer, or investor, knows the U.S. Treasury is good for the value of the bond, plus interest.
What is the place of guaranteed investments in the financial world ? They are used in setting up trusts. They are used in the construction of portfolios where a portion of the finances cannot be at risk. A financial portfolio can be constructed in many ways. But in the allocation of assets, a certain percentage of those assets are usually placed in areas where the principal is preserved, and the return is guaranteed. Many insurance Co.s have bond funds. These are investments where the Co. cannot risk loss, but would certainly accept a greater gain than originally guaranteed. However, rates of return vary. This creates an atmosphere of trade.
Guaranteed instruments, like bonds, are actively traded, daily by these bond holders. By proper handling of a bond portfolio it is possible to greatly increase it's yield, without giving up the security of the instruments. This type of trading is not for the novice or uninformed individual. There are Cos. and institutions that have professionals managing these investments for them.
For the individual or smaller corporation using bond funds is a viable way to take advantage of effective bond trading. The bond funds are managed by professionals who know the markets, are involved on a daily basis and who justify their existence by generating healthy returns on investments. The individual can track these funds in the newspaper or on line. Probably the best way to take advantage of these funds is to contact your stockbroker and see what he and his firm recommend for maximizing returns on guaranteed investments. Guaranteed investments should be a part of every portfolio.