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

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kentlacey@sbcglobal.net
kentlacey@sbcglobal.net
5 months 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
8 months ago

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

Mike Zaccardi
Mike Zaccardi
11 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
11 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
5 months 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
11 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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