When markets turn volatile and fears of a recession mount, safe, low-risk investments get a moment in the sun. Federal Deposit Insurance Corporation (FDIC)-insured accounts and other safer investments can help cautious investors combat inflation while securing their savings.
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 still paying more than they have in recent history, despite a series of Federal Reserve interest rate cuts that began in 2024.
Safe, FDIC-insured and government-backed options
The investments below all come with insurance, which make their risk practically nonexistent. Traditionally, they are considered very safe investments. However, their yields are also lower, which is a typical trade-off when you’re investing for safety.
What are they? These are savings accounts that allow you to spend directly from the account. Savings accounts, by comparison, limit the number of transactions per month.
What’s safe about them? These FDIC-backed accounts guarantee deposits of 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 0.61%. (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.
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 and transferring money into it.
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 because they make it easy for customers to move money seamlessly to and from an investing account.
What’s safe about them? Cash management accounts are offered by non-bank financial institutions, yet the FDIC still backs them through partnerships with banks.
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, which they can use to lend to other customers or invest. They often offer higher rates than savings accounts to incentivize you to start a CD. The downside? If you need to access the cash in your CD, you may be hit with an early withdrawal penalty, often consisting of a few months’ interest.
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. Most banks offer CDs. However, for the same reasons noted above, yields tend to be much higher through online banks.
5. Treasury notes, bills and bonds, or Treasury accounts
The most significant differences between Treasury bills, notes, and bonds are the length of time the government holds your money and your interest rate.
Current returns: Vary by type of Treasury.
Alternatively, you can sell your bond if you wish, though you’ll lose out on the interest payments you would have had until it matured.
