Best Places To Invest Your Cash Today

With interest rates climbing, it's a good time to consider where to invest your cash to make some extra money. While the stock market might be volatile, you can still make a decent return without taking on too much risk.

- High-yield savings accounts: These accounts offer a much higher return than traditional savings accounts, with some paying over 4% APY. They are also FDIC-insured, so your investment is protected.

- Money market accounts: These accounts offer a slightly higher return than high-yield savings accounts and provide features such as ATM cards, checks, and deposit slips. They are also FDIC-insured.

- Certificates of Deposit (CDs): CDs are a good option if you want to lock in a high-interest rate for a fixed period. They are federally insured and offer a higher rate of return than savings accounts, but your money is not as accessible.

- Government bonds: These are safe and low-risk investments, backed by the US government. They offer reliable income and are highly liquid, making it easy to sell and access your money.

- Treasury bills: T-bills are nearly risk-free and highly liquid, making them a safe option for parking your cash. They can be purchased directly from the government or through brokerages.

High-yield savings accounts

• LendingClub Bank – 5.00% APY with no minimum opening deposit requirement and no monthly service fees.
• BrioDirect – 5.00% APY with a $5,000 minimum opening deposit requirement.
• EverBank – 4.75% APY with no minimum opening deposit requirement and no monthly maintenance fee.
• Bread Savings – 4.75% APY with a $100 minimum opening deposit requirement and no monthly maintenance fees.
• CIT Bank – 4.70% APY with a $100 minimum opening deposit requirement and no monthly maintenance fee.
• Bask Bank – 4.65% APY with no minimum opening deposit requirement and no monthly service fee.
• UFB Direct – 4.31% APY with no minimum opening deposit requirement and no monthly service fee.
• Capital One 360 Performance Savings – 4.00% APY with no minimum deposit or balance requirements and no monthly fees.
• Barclays Tiered Savings Account – 4.50% APY with no monthly fees or minimum balance requirements.
• SoFi Checking and Savings – 4.20% APY with no minimum deposit requirement and no monthly maintenance fee.
• American Express High Yield Savings Account – 4.00% APY with a $0 minimum balance requirement, no monthly maintenance fees, and a well-regarded mobile app.

Money market accounts

Interest rates on money markets are variable and can change over time. They are not fixed like with a CD. They are more like a savings or checking account where the rate is variable and the account is liquid. That means you can deposit and withdraw funds more or less as you choose.

• Quontic Bank – 5.00% APY
• Brilliant Bank – 4.85% APY
• Northern Bank Direct – 4.75% APY
• Republic Bank of Chicago – 4.61% APY
• MYSB Direct – 4.60% APY
• Prime Alliance Bank – 4.50% APY
• Merchants Bank of Indiana – 4.50% APY
• All America Bank – 4.40% APY
• Redneck Bank – 4.40% APY
• Presidential Bank – 4.37% APY
• UFB Direct – 4.31% APY
• EverBank – 4.30% APY
• Sallie Mae Bank – 4.20% APY
• Ally Bank – 4.00% APY
• Discover Bank – 3.80% APY
• Spectrum Credit Union – 3.80% APY

Short-term bond funds

• Time Horizon: Short-term bond funds are suitable for those with a short-term investment horizon, typically within three to five years. If you're saving for a goal within this timeframe, these funds offer a good balance between modest returns and low risk.
• Interest Rate Sensitivity: Short-term bonds are less sensitive to changes in interest rates compared to longer-term bonds. This means that investors won't suffer significant losses if interest rates increase. Remember that interest rates and bond prices have an inverse relationship.
• Yield: Investors in short-term bond funds earn a yield, which represents the income produced by the bonds in the portfolio relative to their current market price. Look for funds with competitive yields to maximize your returns.
• Expense Ratio: Pay close attention to the fund's expense ratio or fee. A lower expense ratio means that a more significant portion of the fund's returns will go into your pocket. All else being equal, choose funds with lower expense ratios.
• Credit Risk: Some short-term bond funds invest primarily in investment-grade corporate bonds, which are considered lower-risk than high-yield or "junk" bonds. However, even investment-grade bonds carry some credit risk, so it's important to assess the credit quality of the bonds in the fund's portfolio.
• Diversification: Diversification is essential to manage risk effectively. Look for short-term bond funds that invest in a diverse range of government and corporate bonds across different sectors and maturities. This helps spread out the risk and reduce the impact of any single bond default or sector-specific economic downturn.
• Liquidity: Short-term bond funds generally offer moderate liquidity, allowing you to access your money within a few years if needed. However, keep in mind that withdrawing your money before the bonds mature may result in penalties or loss of potential gains.

• Baird Short-Term Bond (BSBIX): This actively managed fund invests in high-quality corporate bonds, securitized credit, and government bonds. It has an expense ratio of 0.55% and an effective duration of 1.84 years.
• JPMorgan Limited Duration Bond ETF (JPLD): This ETF emphasizes short-term mortgage and asset-backed securities. It has a low expense ratio of 0.24% and is known for its stringent security selection and stable duration.
• PGIM Short-Duration Multisector Bond Fund/ETF (SDMZX): This fund is suitable for investors willing to take on a bit more risk. It aims to outperform the Bloomberg US Government/Credit 1-3 Year Index by 150 basis points annually and has an expense ratio of 0.40%.
• PGIM Short-Term Corporate Bond (PSTQX): This actively managed fund focuses on corporate bonds rated A or BBB. It has a longer-duration approach with an expense ratio of 0.38% and an effective duration of 2.66 years.
• Schwab Short-Term US Treasury ETF (SCHO): This passive bond ETF tracks the Bloomberg US Treasury 1-3 Year Index. It has an ultra-low expense ratio of 0.03% and minimal credit and interest-rate risk.
• SPDR Portfolio Short Term Treasury ETF (SPTS): This ETF, managed by State Street, invests in short-term US Treasuries, offering low credit and interest-rate risk. It has an expense ratio of 0.03% and an effective duration of 1.85 years.
• Vanguard Short-Term Corporate Bond (VSTBX, VCSH): This fund, available as both a mutual fund and an ETF, tracks the Bloomberg US 1-5 Year Corporate Bond Index. It takes on a fair amount of credit risk and has a low expense ratio of 0.05% for the mutual fund and 0.04% for the ETF.
• Vanguard Short-Term Treasury (VSBSX, VGSH): This fund invests exclusively in short-term US Treasuries, offering minimal credit risk. It tracks the Bloomberg US Treasury 1-3 Year Index and has an expense ratio of 0.07% for the mutual fund and 0.04% for the ETF.

Exchange-traded funds (ETFs)

ETFs offer several advantages over other investment options. They provide instant diversification by investing in multiple assets, often with lower fees than other types of funds. ETFs are also more tax-efficient than mutual funds, as they only add and remove securities when the index does, resulting in fewer capital gains distributions. Additionally, ETFs have lower expense ratios, with an average ETF expense ratio of 0.05% compared to the industry average of 0.22%.

There are different types of ETFs available, including stock ETFs, commodity ETFs, exchange-traded notes (ETNs), bond ETFs, international ETFs, crypto ETFs, sector ETFs, and leveraged ETFs. It's important to evaluate ETFs based on their management costs, commission fees, liquidity, and how they fit into your investment portfolio and risk tolerance.

ETFs can be purchased through online brokerage platforms or apps, many of which offer commission-free trading. When investing in ETFs, it's important to consider your investment goals, risk tolerance, and desired asset allocation. While ETFs provide diversification benefits, some ETFs may be highly concentrated in specific industries or sectors, affecting their overall risk profile.

Overall, ETFs are a popular investment option that offers a balance of diversification, low costs, and flexibility, making them a viable choice for investors looking to grow their money in the short to medium term.

Government bonds

One option to consider is US Treasury Bonds. While the stock market may be unpredictable, investing in government bonds can provide a stable opportunity to earn extra money without taking on excessive risk. The Federal Reserve's decision to continue raising rates has led to higher yields on savings and money market accounts, making them more attractive investment options.

When considering investing in government bonds, it is important to evaluate your financial goals and ensure that you are saving enough for emergencies and short-term goals. High-yield savings accounts can provide a risk-free way to grow your money, but they may not offer the same returns as other investments over the long term.

Additionally, it is worth noting that investing in the stock market or other traditional long-term investments can provide higher returns over time. However, government bonds can be a good option for those seeking a more stable and secure investment, especially during periods of economic uncertainty.

• Interest Rate Risk: Government bonds are sensitive to interest rate changes. When interest rates rise, bond prices fall, and vice versa. This is an important factor to consider when deciding when to buy or sell bonds.
• Credit Rating: Government bonds are considered "risk-free" and are generally backed by the US government. This makes them a lower-risk investment compared to corporate or municipal bonds.
• Yield: The yield on government bonds can be competitive compared to other investment options. For example, the yield on the 10-year Treasury note was above 4% in mid-2024.
• Maturity: Government bonds can have different maturities, such as short-term (T-bills) or long-term (Treasury notes and bonds). Short-term bonds are ideal for parking your cash for a short period, while long-term bonds offer a fixed income over a more extended period.
• Tax Benefits: Interest income from government bonds may be exempt from state and local taxes, providing additional financial benefits.

In conclusion, government bonds can be a stable and reliable investment option, especially during times of high inflation and rising interest rates. They offer a secure and predictable return, making them attractive to investors seeking lower-risk opportunities. However, it is important to consider your financial goals and conduct thorough research before investing.

Frequently asked questions