Guaranteed Returns: Earning 6% On Risk-Free Investments

Earning a 6% return on your investments without taking on any risk is a challenging endeavour. In the current economic climate, with high inflation and interest rates, it is possible to find savings accounts and certificates of deposit (CDs) that offer a 6% annual percentage yield (APY) or higher. However, these rates may not stay this high in the long term, and it's important to note that all investments carry some level of risk.

If you're looking for completely risk-free investment options, you may want to consider US Treasury securities, such as Treasury bills, notes, and bonds, which are backed by the full faith and credit of the US government. Another option is a high-yield savings account, which offers liquidity and is typically insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per account. While these options may not always provide a 6% return, they are considered safe and stable choices for preserving your capital.

For those willing to take on some risk, there are a variety of investment options that can potentially provide a 6% yield or higher. These include dividend-paying stocks, investment-grade corporate bonds, and preferred stocks. However, it's important to remember that these options come with a higher level of risk and volatility compared to low-risk investments.

Before making any investment decisions, it is always recommended to consult with a qualified financial advisor to ensure that your choices align with your financial goals and risk tolerance.

High-yield savings accounts

When shopping for a high-yield savings account, compare factors such as initial deposit requirements, interest rates, minimum balance requirements, fees, and access to your money. Some high-yield savings accounts may offer an ATM card, but there may be limits on the number of transactions or amounts you can withdraw.

• BrioDirect: 4.75% APY
• Popular Direct: 4.60% APY
• LendingClub Bank: 4.50% APY
• Bask Bank: 4.50% APY
• Bread Savings: 4.50% APY
• EverBank: 4.40% APY
• CIBC Bank USA: 4.38% APY
• CIT Bank: 4.35% APY
• TAB Bank: 4.26% APY
• MySavingsDirect: 4.10% APY

Money market funds

Compared to traditional bank savings accounts, money market funds generally provide higher yields and easier access to your money. They are also considered safer than other types of mutual funds due to their low-risk nature and the fact that they invest in highly liquid, short-term securities.

However, it is important to note that money market funds are not insured by the Federal Deposit Insurance Corporation (FDIC). Instead, they may be eligible for coverage under the Securities Investor Protection Corporation (SIPC) when held in a brokerage account.

Overall, money market funds can be a good option for those seeking a stable, low-risk investment with higher yields than traditional savings accounts. They are suitable for short-term investment goals but may not be ideal for long-term goals like retirement planning due to their low returns and lack of capital appreciation.

Short-term certificates of deposit

CDs are a good option for investors who want to keep their money safe while earning interest. They are a secure way to separate savings from everyday cash, but they may require larger minimum balances and have transfer limitations. CDs are best suited for short-term financial goals.

When you open a CD, you agree to keep your money in the account for a set period. In exchange for a higher interest rate, you won't be able to access your funds until the term ends. The term can vary from three months to five years, depending on the bank. Some banks also offer no-penalty CDs, which allow you to withdraw your money early without incurring a penalty.

CDs typically offer attractive fixed rates, and your money will grow at this rate over the specified term. The best CD rates can earn you above 4% APY, with some banks offering competitive rates of up to 4.65%. To find the best rates, it's a good idea to shop around and compare what different banks offer.

It's important to note that if you withdraw your money from a CD early, you may lose some of the interest you earned, and some banks may also deduct a portion of your principal. Additionally, locking your money into a long-term CD could mean missing out on better rates offered by other banks.

Cash management accounts

One of the key advantages of CMAs is that they provide FDIC insurance beyond the normal $250,000 limit by partnering with multiple banks and spreading deposits across them. This makes CMAs ideal for individuals looking to hold large cash balances. Additionally, CMAs often provide access to a wide network of fee-free ATMs, direct deposits, and check-writing capabilities.

• Wealthfront Cash Account: Offers a 4.00% APY with no fees and a debit card that allows access to over 19,000 fee-free ATMs. It also provides early paycheck direct deposits and can be linked to apps such as Venmo and Cash App.
• Betterment Cash Reserve: Promotional rate of 4.50% APY for three months for new account holders, after which the rate becomes 4.00%. No fees or minimum balance requirements. Offers a debit card, mobile check deposit, and worldwide ATM fee reimbursement.
• Empower Personal Cash: Offers a 4.70% APY with no fees or minimum balance requirements. Provides robust budgeting features through its mobile apps, but currently does not support cash deposits, withdrawals, or check writing.
• Fidelity Cash Management Account: No monthly fees or minimum balance requirements. Offers unlimited ATM fee reimbursement, free check writing, and a debit card. Provides FDIC insurance of up to $5 million through partner banks.
• Vanguard Cash Plus Account: High-yield interest rate with no minimum balance requirements. No fees if you sign up for e-statements; otherwise, there is an annual fee of $25. Offers FDIC insurance of up to $1.25 million for individual accounts through partner banks.

Treasury bills, notes and bonds

Treasury bills mature in under a year, notes pay out in 2, 3, 5, 7 or 10 years, and bonds mature in 20 or 30 years. The US Treasury also issues Treasury Inflation-Protected Securities (TIPS), whose principal value goes up or down depending on the direction of inflation.

Treasury securities are highly liquid and can be bought and sold directly or through mutual funds. If you keep them until they mature, you generally won't lose money, but if you sell them sooner, you could lose some of your principal as the value will fluctuate with interest rates.

Frequently asked questions