Best Stable Investment Funds: Long-Term Growth Strategies

When it comes to investing, there are a variety of options to choose from, each with its own level of risk and potential return. One option that is often considered to be one of the most stable investment funds is a stable value fund.

A stable value fund is a portfolio of high-quality government and corporate bonds that are insured to protect investors from losing their principal or interest payments, even during economic downturns. This insurance feature makes stable value funds nearly as safe as money market funds, which are known for their low risk. While stable value funds don't offer high growth potential, they provide stability and security for investors, particularly those with low-risk tolerances or those nearing retirement.

In addition to stable value funds, there are other investment options that are considered relatively safe, such as treasury bills, notes, and bonds, as well as money market mutual funds, and high-yield savings accounts. These options typically offer low returns but provide stability and liquidity for investors.

It's important to remember that no investment is completely risk-free, and it's always advisable to conduct thorough research and consult with a financial professional before making any investment decisions.

High-yield savings accounts

• Interest Rates: High-yield savings accounts typically offer interest rates that are much higher than traditional savings accounts, often 10 to 12 times the national average. This means your savings balance will grow faster over time without any additional effort on your part.
• Safety: High-yield savings accounts are considered very safe because they are federally insured by the Federal Deposit Insurance Corporation (FDIC) for banks and the National Credit Union Administration (NCUA) for credit unions. This insurance covers up to $250,000 per depositor, so your money is secure even if the financial institution fails.
• Accessibility: High-yield savings accounts offer easy access to your money. You can typically withdraw funds at any time, although some accounts may limit the number of withdrawals to six per month. Online and mobile banking services also make it convenient to manage your savings.
• Fees and Minimums: Some high-yield savings accounts have monthly maintenance fees, while others offer fee-free options. There may also be minimum balance requirements to maintain a higher interest rate or avoid fees. It's important to read the fine print to understand the specific terms and conditions of each account.
• Opening an Account: Opening a high-yield savings account is usually a straightforward process and can often be done entirely online. You'll need to provide personal information, such as your Social Security number, and fund the account with an initial deposit, which may have a minimum requirement.
• Pros and Cons: The main advantage of high-yield savings accounts is the potential to earn significantly higher interest rates compared to traditional savings accounts. This makes them ideal for emergency funds or saving for specific goals. However, interest rates on these accounts can fluctuate, and there may be restrictions on withdrawals. Additionally, some accounts may have minimum balance requirements or fees, so it's important to carefully review the terms before opening an account.

Money market funds

• Vanguard Federal Money Market Fund (VMFXX)
• Schwab Value Advantage Money Fund (SWVXX)
• JPMorgan Prime Money Market Fund (VMVXX)
• Invesco Government Money Market Fund (INAXX)
• Fidelity Money Market Fund (SPRXX)
• Vanguard Municipal Money Market Fund (VMSXX)

Short-term certificates of deposit

Interest Rates and Terms:

Short-term CDs typically have maturity terms of less than a year, offering flexibility as your money isn't locked in for an extended period. The interest rates on these CDs are usually lower compared to long-term CDs. However, they provide an opportunity to add and withdraw money within a shorter time frame. It's important to shop around for the best rates, as they can vary significantly between financial institutions.

Fixed Interest Rates:

CDs offer fixed interest rates, which means you know exactly how much you'll earn by the end of the term. This provides a guaranteed return on your investment, making it a stable choice. However, if interest rates rise after you've locked in your CD, you could miss out on higher returns.

Early Withdrawal Penalties:

It's important to note that withdrawing money from a CD before its maturity date will typically result in an early withdrawal penalty. This penalty can reduce your earnings or, in some cases, even eat into your principal amount. Therefore, short-term CDs are ideal if you want to avoid such penalties, as the impact of an early withdrawal is generally lower over a shorter term.

Federal Insurance:

CDs held at member banks are protected by the Federal Deposit Insurance Corporation (FDIC), while credit unions insure CDs through the National Credit Union Administration (NCUA). Both options provide insurance coverage of up to $250,000 per depositor, ensuring the safety of your investment.

Convenience and Accessibility:

Short-term CDs are widely accessible, offered by most banks and credit unions, as well as online platforms. They also tend to have lower minimum deposit requirements, making them an attractive option for those with varying financial capacities.

In summary, short-term certificates of deposit are a stable and secure investment option, particularly for those seeking a conservative approach with limited risk. They offer fixed interest rates, federal insurance, and flexibility in terms of accessibility and early withdrawals. However, it's important to carefully consider the interest rates, terms, and potential penalties before committing to any CD investment.

Treasury bills, notes, bonds and TIPS

Treasury bills, notes, bonds, and TIPS are US government-issued fixed-income securities that are very low risk. They are backed by the full faith and credit of the US government, which has never defaulted on its debt. They are crucial for both the government and investors. For the federal government, they are a means of raising funds to cover public expenses and manage the national debt. For investors, they are a low-risk investment option, providing a safe way to earn interest and diversify investment portfolios.

Treasury bills, or T-bills, are short-term investments that mature in one year or less. They are sold at a discount to their face value and don't pay periodic interest. Instead, investors receive the full face value at maturity, with the difference representing their return. T-bills are often used for short-term cash management or as a near-cash holding in a portfolio.

Treasury notes, or T-notes, have maturities ranging from two to ten years. They pay interest every six months but usually offer lower yields than T-bonds. The 10-year T-note is the most closely watched government bond and is used as a benchmark rate for banks to calculate mortgage rates. It is also often used to lower the volatility of an investment portfolio.

Treasury bonds, or T-bonds, offer the longest commitment, taking 20 or 30 years to mature. They typically mature in 20 or 30 years and offer the highest coupons or interest, paid twice yearly. Treasury bonds usually pay the highest interest rates because investors want more money to put aside for the longer term. They are often called long bonds because they take the most time to mature out of government-issued securities.

Treasury Inflation-Protected Securities, or TIPS, are securities whose principal value goes up or down depending on the direction of inflation. They are available as medium and long-term securities, maturing in five, ten, or thirty years. The interesting aspect of TIPS is that the principal is adjusted periodically based on changes in the consumer price index (CPI), while the interest rate is fixed. This adjustment protects the holder's purchasing power, virtually guaranteeing a real return over and above the rate of inflation.

In summary, Treasury bills, notes, bonds, and TIPS are highly stable investment options due to their low risk and US government backing. They offer a safe way to earn interest and diversify portfolios, making them attractive choices for investors seeking stability and security.

Dividend-paying stocks

• REV Group Inc (REVG)
• Pennymac Mortgage Investment Trust (PMT)
• Arbor Realty Trust Inc (ABR)
• Seven Hills Realty Trust (SEVN)
• CVR Energy Inc (CVI)
• Franklin BSP Realty Trust Inc (FBRT)
• AG Mortgage Investment Trust Inc (MITT)
• Alexander's Inc (ALX)
• Movado Group, Inc (MOV)
• Granite Ridge Resources Inc (GRNT)

Frequently asked questions