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What’s the best place to earn a safe yield?

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kentlacey@sbcglobal.net
kentlacey@sbcglobal.net
1 month ago

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.

Michael1
Michael1
4 months ago

High quality munis seem to be doing better than taxable bonds even before the tax advantage. FLTMX, FTABX…

Mike Zaccardi
Mike Zaccardi
7 months ago

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.

Philip Stein
Philip Stein
6 months ago
Reply to  Mike Zaccardi

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.

Moesha
Moesha
1 month ago
Reply to  Philip Stein

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.

Rick Connor
Rick Connor
7 months ago

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.

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