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I find it interesting that “safe” yeilds are a moving target. Comparing rates and options from the comments given just 2 years ago would not be the optimal “safe” investment for today (April, 2024). For example, money settlement funds at Vanguard and Fidelity now significantly beat HSYA accounts, such as those at Ally. The safest bet may simply be to keep short term dollars flexible, no matter what the vehicle used.
I use a 6 month T-bill ladder for the majority of my cash. I get about 40bps more than the Fidelity money market. I use a seven year ladder for muni bonds so some are always up for renewal. I keep my tax payments in a high yield account at Synchrony Bank.
Now (Aug 2023) there are one year CDs available paying 5.5%. If you are looking to place less than $240k, these are good.
I like preferred stocks as they are the first to be paid by a company and they can have higher yields. My favorites are offered as perpetual by the Federal Agricultural Mortgage Corporation a.k.a. “Farmer Mac.” Series C is paying 6% and series E pays 5.75% based on its $25 book value. The quarterly payment is the same whether the share price goes up or down. As an income investor, I don’t stress about the price of the shares. Most preferred stocks have call dates where the issuer can choose to redeem them at their $25 book value but these two mentioned continue to renew. Because these are Class A shares, they are the first paid by the issuer in good times or financial hardship.
US Treasuries
What maturity Treasurys would you favor?
The question “best place for safe yield” is almost a contradiction. The safest yield is zero, but that is not the best place to be. And likewise, 12% yield might be “best” but it could be far from safe. Like everything in life a compromise might be the correct decision, but you place you bets and watch the dice roll.
High quality munis seem to be doing better than taxable bonds even before the tax advantage. FLTMX, FTABX…
0.5% at an online savings account. 0% at your bank. A few bps in short-term treasuries. I recently wrote on Series I bonds offering a current yield of 3.5%, but there are strings attached. Series EE bonds offer a safe 3.5% CAGR for 20 years, which beats the pants off a 20-year Treasury bond yield right now (but again, there are limits and terms to know).
Over a long enough time frame, owning an aggregate bond fund will be a fairly low risk. I wouldn’t describe it as ‘safe’, but even if rates rise, the holdings in the portfolio will include higher-yielding assets as low-yielding assets mature. So there is some safety in that.
Online FDIC insured savings accounts are available at Ally, Capital One, Amex, and a few others yielding 4% or more.
The yields on savings bonds are certainly tempting, but these bonds are relatively illiquid. You can’t redeem a savings bond during the 12-months following a purchase, and you will sacrifice three months interest earnings if you redeem before five years.
With the threat of rising inflation, I would have concerns about buying Series EE bonds right now.
A good point, but I-bonds (at 7+ %) will provide 3.5% after 6 months; and even if the rate eventually drops to 0, you’ll still have made that 3.5% after a year, even after sacrificing the prior 3-months interest.
Can I Bond interest be deferred to time of redemption? I don’t find the infomation on the government site.
With Series I savings bonds, you have to defer your interest — you receive it when you cash in your bonds.
https://treasurydirect.gov/savings-bonds/i-bonds/
By definition, the available safe yields are pretty low. FDIC accounts, treasuries, TIPS, CDs, are all pretty low. Short term bonds are a little better. I’ve put some money in a few BDCs with high yield, but only because I have some personal knowledge of the quality of the company.