NOT A GAMBLER? SINK CASH INTO SECURE INVESTMENTS, BUT EXPECT LOWER YIELDS.

Byline: Pam Park Staff Writer

If the stock market's ups and downs make your stomach churn, investment advisors may suggest you grab the Pepto Bismol and put at least part of your money in stocks.

But if your personality or situation calls for other kinds of investments, there are some less-risky - though lower-yielding - alternatives.

The extremely risk-averse can consider government-backed investments such as savings bonds, treasuries and municipal bonds, or certificates of deposit, money market deposit accounts, credit union accounts and fixed annuities.

Beware, however, that the general rates for ``riskless money'' are about 6 percent, said Gary Bryant, vice president and branch manager at Fidelity Investments in Century City.

These investments may preserve the cash you sunk in them, but considering a current inflation rate of about 3 percent, plus any expenses such as brokerage fees and income taxes where applicable, they may offer relatively small gains. If your money is in a savings account that pays 2 percent interest, in effect, you are losing money.

According to the Consumer Federation of America, Americans miss out on $30 billion to $50 billion of interest each year. Most don't know the interest rate on their savings account, which may be as little as 1 percent to 2 percent.

``Stocks have a historical return of 10 percent to 12 percent over 80 years, where non-stock conservative investments have yields in the range of 4, 5, 6 percent,'' Bryant said.

The time horizon, or when you will need the money, is of paramount importance in choosing any investment, investment advisers say.

When you buy a bond or a certificate of deposit, you commit your money for a specified period of time, and you may incur significant penalties if you withdraw it before the investment matures. The term of the investment could be months, years, or even decades.

``The longer you're willing to lock your money up, the higher a fixed income investment will pay you,'' Bryant said.

Government-backed bonds such as savings bonds and treasuries are considered safe because, in a pinch, the government can always print more money to pay them. Their return may be a little higher than the interest they earn, because there are some tax benefits. Treasuries are exempt from state and local taxes. Municipal bonds are backed by the city's taxing ability, and they are generally exempt from state and federal income tax. Savings bonds are federal tax-deferred until maturity.

However, even bonds have some risk, said Vern Kozlen, executive vice president of City National Investments in Beverly Hills.

``Last year, some bonds declined as much as 10 percent in value,'' he said.

If you sell a bond before it matures, the price you can get for it depends on market conditions. If market interest rates are higher than your bond's interest rate, the bond will drop in value.

Government bonds such as savings bonds and treasuries, municipal bonds and corporate bonds can be bought individually, or through banks and brokers. Government bonds can also be bought online at www.treasurydirect.gov.

``If you feel we're going toward a recession, it's a great time to be invested in bonds,'' said Gordon Klein, professor at UCLA's Anderson School. ``When the economy slows, fewer people borrow money, which causes interest rates to fall. You feel good you locked in a high interest rate on your bondholding, and indeed, the value of the bond goes up.''

For the really perverse, or those who want to offset a stock market slide, there are mutual funds called short funds or ultras, Klein said.

``Ultras say for every dollar the stock market goes down, you make $2,'' he said.

Klein also had a tip for people looking at certificates of deposit.

``If you're shopping for CDs, consider online lenders who don't have the overhead of a brick-and-mortar facility and get higher rates,'' Klein said.

Certificates of deposit and some money markets are protected up to certain limits by the Federal Deposit Insurance Corp. if they are bought through participating banks or savings associations.

``Most banks also offer money market mutual funds that offer competitive rates of return for short-term investment objectives,'' Kozlen said.

Money market deposit accounts offer some degree of access to your money and a higher rate of return than savings accounts.

Experts also recommend joining a credit union.

``Nationally, credit unions pay a half-point to a full point higher than other financial institutions pay on the same accounts,'' said Bill Hampel, chief economist for the Credit Union National Association in Washington, D.C. ``In most cases, they will find credit unions one of the best deals around as a place to put their money.''

Hampel said some credit unions have special certificate accounts, often called market index certificates, that are tied to the stock market's performance. For example, they might pay 60 percent of the percentage increase in the stock market over the next two years. If the stock market goes up a lot, you get a decent return, and if it falls you get your money back, he said.

``Your capital is completely protected,'' Hampel said.

Fixed annuities are an option some people consider for retirement income. They are contracts in which you make a single payment or a series of payments and the company agrees to pay you a specified income, now or later, for a specified period of time.

Annuities can be bought at banks, and from insurance companies, brokers and other financial services agents, Kozlen said.

They tend to have big penalties for early withdrawal, he said.

``Annuities should be viewed as very long-term investments, he said.

CAPTION(S):

drawing

Drawing: CREDIT UNION, CDs, MONEY MARKET ACCOUNTS

Jorge Irribarren/Staff Artist