Safe Havens: Where To Invest Now

The safest investments are those that carry a low risk of losing money, but also tend to offer lower returns.

- High-yield savings accounts

- Money market accounts

- Certificates of deposit (CDs)

- Treasury notes, bills and bonds

- Dividend-paying stocks

- Investment-grade corporate bonds

- Mutual funds

High-yield savings accounts

• UFB Direct: UFB Secure Savings offers a competitive APY with no maintenance or service fees and no minimum deposit. It also includes an ATM card for convenient cash withdrawals and 24/7 phone support.
• BrioDirect: BrioDirect High Yield Savings Account offers an impressive APY and expanded FDIC insurance coverage of up to $225 million. However, it requires a high minimum opening deposit of $5,000.
• Valley Direct: Valley Direct High-Yield Savings offers a competitive interest rate, a low minimum opening deposit of $1, and no monthly maintenance charges.
• My Banking Direct: My Banking Direct High-Yield Savings offers an exceptional APY of 5.55%, a reasonable minimum deposit of $500, and a unique savings/checking combo that allows for easy transfers between accounts.
• Western Alliance Bank: Western Alliance Bank High-Yield Savings Premier offers a competitive interest rate of 5.36% with no required minimum balance or monthly fees. It also provides 24/7 online account access.

Money market funds

There are various types of money market funds, including government, prime, and municipal funds. Government money funds invest at least 99.5% of their total assets in cash, government securities, and repurchase agreements that are fully collateralized by cash or government securities. Prime money funds invest in floating-rate debt and commercial paper of non-Treasury assets. Municipal money funds buy municipal bonds and other debt securities, offering potential tax benefits as earnings are typically exempt from federal and sometimes state income tax.

Short-term certificates of deposit

A CD is a type of time deposit savings vehicle where you agree to leave your money untouched for a specified term. In return, you receive a fixed interest rate. At the end of the term, you can withdraw your deposit plus interest or roll it over into a new CD account.

CDs are available with varying maturity terms, typically ranging from 28 days to 10 years. Short-term CDs have a maturity of less than a year, while long-term CDs have a maturity of one year or more. Banks often reward savers who choose long-term CDs with higher interest rates. However, in an inverted yield curve situation, short-term CDs may offer higher interest rates than long-term ones.

The Federal Deposit Insurance Corporation (FDIC) insures CDs held at member banks for up to $250,000 per depositor. Credit unions can provide similar insurance through the National Credit Union Administration (NCUA).

When choosing between short-term and long-term CDs, it's important to consider your investment horizon and liquidity needs. Short-term CDs offer the advantage of flexibility, allowing you to access your money within a relatively short time frame. On the other hand, long-term CDs may be more suitable if you have a fully funded emergency fund and don't anticipate needing to withdraw your savings right away.

To maximise your returns, you can consider creating a CD ladder by opening multiple CDs with different maturity terms and rates. This strategy helps you avoid early withdrawal fees and allows you to take advantage of changing interest rates.

Treasury bills, notes, bonds and TIPS

Treasury bills, notes, bonds, and TIPS are considered some of the safest investments available. They are backed by the full faith and credit of the US government, which means they come with a guarantee that the government will honour the debt. This makes them virtually risk-free and a stable investment option.

Treasury bills, notes, and bonds are fixed-income securities issued by the US government and differ mainly in their duration, the interest they pay, and the amount of interest rate risk they carry. Treasury bills, or T-bills, mature within a year and are sold at a discount to their face value, which is received upon maturity. T-bills do not pay interest. Treasury notes, or T-notes, have maturities of two to ten years and pay interest semi-annually. Treasury bonds, or T-bonds, have the longest maturities of 20 to 30 years and also pay interest twice a year. T-bonds typically offer higher interest rates than T-notes due to their longer maturities.

Treasury Inflation-Protected Securities (TIPS) are a type of government bond that protects your money from inflation. The value of the principal on TIPS rises and falls over the term of the security, depending on the current rate of CPI inflation. Interest is paid every six months, based on the adjusted principal. If the principal is higher than the original investment at maturity, you keep the increased amount. If it is equal to or lower, you receive the original amount.

Treasury securities are also budget-friendly, as they can be purchased in increments of $100, and they are exempt from state and local taxes. However, you will still need to pay federal taxes on the interest earned. They are also easily accessible, as they can be purchased directly from the US government or through a broker.

Dividend-paying stocks

The best dividend stocks are shares of well-established companies that increase their payouts over time. Dividend stocks can provide the fixed income of bonds as well as the growth of individual stocks and stock funds. Dividends are often associated with stable, profitable companies. While share prices of some dividend stocks may not rise as high or quickly as growth-stage companies, they can be attractive to investors because of the dividends and stability they provide.

• Pennymac Mortgage Investment Trust (PMT)
• Franklin BSP Realty Trust Inc. (FBRT)
• International Seaways Inc (INSW)
• Angel Oak Mortgage REIT Inc (AOMR)
• Civitas Resources Inc (CIVI)
• CVR Energy Inc (CVI)
• Evolution Petroleum Corporation (EPM)
• Altria Group Inc. (MO)
• Insteel Industries, Inc. (IIIN)
• Washington Trust Bancorp, Inc. (WASH)
• Chord Energy Corp (CHRD)
• First Of Long Island Corp. (FLIC)
• Alexander's Inc. (ALX)
• Eagle Bancorp Inc (MD) (EGBN)
• Artisan Partners Asset Management Inc (APAM)

When deciding whether to invest in dividend-paying stocks, it is important to consider the dividend yield. A high dividend yield isn't always a good thing—some are unsustainable, and others are just the result of a low stock price. Dividend yields over 4% should be carefully scrutinized; those over 10% tread firmly into risky territory.

It is also important to look at the company's payout ratio, which tells you how much of the company's income is going toward dividends. A payout ratio that is too high—generally above 80%—means the company is putting a large percentage of its income into paying dividends.

Additionally, investors should be selective when choosing dividend-paying stocks and avoid chasing high yields. It is important to screen for dividend durability and reliability and to focus on companies with competitive advantages or economic moats.

Frequently asked questions