Bankers acceptance as an investment tool

While bankers acceptances are primarily low-cost loans for businesses, they also represent a potentially savvy financial investment. A bankers investment is essentially a negotiable draft issued by a financial institution for import and export transactions, generally spanning a three- to six-month period. Amounts invested can be anything from $25,000 to $1 million; and, as a result, investors are usually commercial banks rather than private individuals.

However, it is perfectly possible to invest in bankers acceptances as an individual. You will generally need to approach a commercial bank or a dealer in order to invest in bankers acceptances direct, or you could consider investing indirectly through money-market mutual funds. Bear in mind that yields on bankers acceptances are usually slightly lower than those of CDs, but advantages include good security and the fact that these investment tools are generally traded below face value in a secondary market.

Another option for investors is to put cash into a money market account. This is similar to using a standard savings account, with near-identical opening and closing processes – making it easy to understand and to control. Investors are paid interest based on the amount in their account. Their deposit is then loaned to other individuals or businesses at a higher rate than that paid to the original investor.

The real advantage of a money market account is that the interest is paid monthly, and will almost always be higher than the interest on an average savings account. Interest rates on these types of accounts can vary hugely, so it’s worth checking out the various deals on offer before making a commitment. You should also bear in mind that the interest rate will correspond to the amount of money in the account – so the higher your deposit the more your monthly payments will be.

If you’re considering investing in bankers acceptances, either directly or indirectly, then remember to retain a balanced portfolio. It’s a good idea to have a standard savings account in addition to higher-interest investments. Check out online and international savings accounts to get a better idea of the savings deals on offer - European banks such as Santander offer excellent interest rates on standard savings accounts – take a look at their site for the latest rates.

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