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

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Michael1
Michael1
1 month ago

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

Mike Zaccardi
Mike Zaccardi
4 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
4 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.

Rick Connor
Rick Connor
4 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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