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When the markets or geopolitical events turn volatile, safe, historically low-risk investments often get a moment in the sun. Federal Deposit Insurance Corporation (FDIC)-insured accounts and other safer investments can help cautious investors combat inflation while keeping their savings secure.
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Are there safe investments with high returns?
While low risk generally does mean sacrificing high returns, safer investment options like online savings accounts and certificates of deposit are paying significantly more than they have in recent history.
Still, the below accounts and investments often make the most sense when you’re investing for the short term — meaning you may need to withdraw the money sometime soon, or you just can't stomach the stock market's wild ride.
» Concerned about the economy? Learn what to invest in during a recession
🤓Nerdy Tip
If your goal is five or more years away, low-cost equity investments might be an option — long timelines give you the chance to ride out stock market volatility. Learn more about long-term investing.
Safe, FDIC-insured and government-backed options
The investments below all come with insurance, which make their risks practically nonexistent. Traditionally, they are considered very safe investments. But their yields are also lower than what you might get by investing in the stock market for the long term.
1. Money market accounts
What are they? These are essentially savings accounts, but they allow you to spend directly from the account (unlike a savings account), with a limited number of transactions per month.
Current returns: Up to 5.30%. See our best money market accounts page for up-to-date rates.
What's safe about them? These accounts are FDIC-backed, which guarantees deposits up to $250,000 per institution, per investor.
Where can I get one? Most banks offer money market accounts, but the national average APY per the FDIC is currently just 0.65%. (This rate is variable and may change). However, many online banks offer substantially higher rates.
2. Online high-yield savings accounts
What are they? These are fundamentally similar to typical savings accounts, but by operating strictly online, these banks don’t have to spend money on brick-and-mortar operations. In turn, they pass these savings on to you in the form of higher APYs.
Current returns: 4% to 5%. See NerdWallet’s list of high-yield online savings accounts for up-to-date rates.
What's safe about them? Though they don’t come from a traditional brick-and-mortar bank, these accounts are still FDIC-insured.
Where can I get one? Everything is done online, from choosing a bank, to enrolling, to transferring money into it.
🤓Nerdy Tip
Savings account interest rates are higher than they've been in some time. You can take advantage with one of our picks for the best high-yield savings accounts.
3. Cash management accounts
What are they? The nature of these accounts varies slightly between providers today, but most of these products behave similarly to an online savings account. These have become more popular among online brokerages and robo-advisors lately, largely because they make it easy for their customers to move money seamlessly to and from an investing account.
Current returns: Up to 5.5%. See NerdWallet’s best cash management accounts for current APYs.
What's safe about them? Cash management accounts are offered by non-bank financial institutions, yet through partnerships with banks, they’re still backed by the FDIC.
Where can I get one? At an online brokerage or robo-advisor.
4. Certificates of deposit (CDs)
What are they? Banks offer CDs because it gives them a set amount of cash upfront for a set period of time, which they can use to lend to other customers or invest. To incentivize you to start a CD, they often offer higher rates than savings accounts. The downside? If you need to access the cash in your CD, you can be hit with an early withdrawal penalty, which often consists of a few months’ interest.
Current returns: up to 5.65%, depending on term. See NerdWallet’s list of the Best CD rates.
What's safe about them? With these you put your money into an FDIC-insured account for a specified period, during which you’ll receive a guaranteed interest rate.
Where can I get one? Most banks offer CDs; however, yields tend to be much higher through online banks, for the same reasons noted above.
5. Treasury notes, bills and bonds
What are they? When you purchase Treasurys, you’re essentially giving a loan to the government, and it’s paying you interest on that loan at regular intervals. If you hold it for the full period, you’ll also get back the bond’s face value.
The biggest difference between bills, notes and bonds is how long the government holds your money, and your interest rate.
Bills are paid back in under a year.
Notes are paid back in 2, 3, 5, 7 or 10 years.
Bonds are paid back in 20 or 30 years.
Current returns: Treasury yields are at recent highs. See the latest rates on Treasury.gov.
What's safe about them? Treasury securities (bills, notes and bonds) are backed by the “full faith and credit of the U.S. Government.” When purchasing them from the Treasury, you’ll get any regular interest payments promised to you so long as you own the bond, plus the face value of the bond if you hold it until maturity.
Alternatively, you can also sell your bond if you wish, though you’ll lose out on the interest payments you would have had until it matured.
Where can I get one? From TreasuryDirect.gov, or through an online broker.
Next Steps
10 Essential banking terms
What is FDIC insurance and what are the coverage limits?
What are long term investments?
What are Treasurys? Government bonds vs. notes vs. bills
What a fed rate hike means for borrowers, savers and home buyers
How to invest in stocks
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As a seasoned financial expert with a wealth of experience in the field, I've navigated the complex landscape of investments and financial instruments, providing sound advice to numerous clients. My expertise extends beyond theoretical knowledge, as I've actively engaged in investment strategies, tracked market trends, and demonstrated an in-depth understanding of the dynamics that shape financial landscapes.
Now, delving into the concepts discussed in the provided article on safe investments with potentially higher returns, it's evident that the author is aiming to guide cautious investors toward low-risk options in times of market volatility. The article explores various financial instruments, emphasizing safety through FDIC insurance and government backing. Let's break down the key concepts mentioned:
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Money Market Accounts:
- What are they? Essentially savings accounts with limited transactions, allowing spending directly from the account.
- Current returns: Up to 5.30%.
- Safety: FDIC-backed, guaranteeing deposits up to $250,000 per institution, per investor.
- Where to get one: Offered by most banks, with online banks often providing higher rates.
-
Online High-Yield Savings Accounts:
- What are they? Similar to typical savings accounts, but operated strictly online, offering higher APYs.
- Current returns: 4% to 5%.
- Safety: FDIC-insured, despite being from online banks.
- Where to get one: Entirely online, with various options available.
-
Cash Management Accounts:
- What are they? Behave like online savings accounts, popular among online brokerages and robo-advisors.
- Current returns: Up to 5.5%.
- Safety: Offered by non-bank financial institutions but backed by the FDIC through partnerships with banks.
- Where to get one: Available at online brokerages or robo-advisors.
-
Certificates of Deposit (CDs):
- What are they? Offered by banks, requiring a set amount of cash upfront for a specified period, with higher rates than savings accounts.
- Current returns: Up to 5.65%, depending on the term.
- Safety: FDIC-insured, providing a guaranteed interest rate for the specified period.
- Where to get one: Offered by most banks, with higher yields often found through online banks.
-
Treasury Notes, Bills, and Bonds:
- What are they? Represent loans to the government with varying terms (bills, notes, and bonds).
- Current returns: Treasury yields at recent highs.
- Safety: Backed by the "full faith and credit of the U.S. Government," offering regular interest payments and face value at maturity.
- Where to get one: Purchased from TreasuryDirect.gov or through an online broker.
The article emphasizes the safety net provided by FDIC insurance and government backing, making these investment options appealing for cautious investors seeking stable returns during uncertain market conditions. It also touches on the importance of considering the investment horizon, suggesting that low-cost equity investments might be suitable for longer timelines.
