“For money I don't need tomorrow, I can get a little more return, but I’m not tying my money up, and I can usually get it within a day or two,” he said.
Certificates of Deposit
For those willing to forgo easy access to their money temporarily, certificates of deposit, or CDs, can provide a higher return. The lockup period on these products generally ranges from three months to six years or more, and they typically offer larger yields for longer maturity dates.
The downside is taking your money out early can result in a penalty. However, some CDs offer a modest penalty, or even none at all. Just make sure to read the fine print.
Marcus currently offers a range of CD options, from six months at 0.5% annual percentage yield to six years at 2.55%. There’s also a range of no-penalty CDs, including a seven-month one for 0.45% yield. They all require a minimum deposit of $500.
Capital One also has some of the best rates among CDs, according to analysts at Bankrate.com. Its one-year CD has a 1.30% yield and its five-year version offers 2.25%.
I Bonds
One of the most popular options this year in the usually sleepy world of cash-like products is the Series I savings bond from the US Treasury.
The Treasury Department sets the variable rate for these products at the beginning of May and November each year, with the rate rising or falling based on inflation. Currently, it’s 9.62%, which outpaces the latest inflation reading at 8.3%.
“These can be a great option for someone who wants to put away some cash for a set period of time and earn a great return,” said Eric Baskin, founder of Baskin Financial Planning in Ohio.
A potential downside is that your rate changes every six months from the date you initially purchased, meaning it could be revised lower if inflation subsides. The bonds also must be held for at least one year, and cashing them in before five years mean you’ll give up the last three months of interest earned. There’s a $10,000 limit on how much an individual can invest each calendar year.
ETFs
Although technically not cash, there are a range of exchange-traded funds that effectively act as cash-like instruments.
Arnott at Morningstar likes ultra-short duration bond ETFs, which typically include fixed-income securities that mature within a year. For instance, there’s the BlackRock Ultra Short-Term Bond ETF (ICSH) and the Vanguard Ultra Short Bond ETF (VUSB).
Another option is short-term Treasury ETFs, which are widely considered safe because they’re backed by the federal government. BlackRock’s iShares 0-3 Month Treasury Bond ETF (SGOV) has posted a small return this year, no small feat when most assets classes are in the red.
Finally, TIPS ETFs — which include Treasury Inflation-Protected Securities — offer investors a chance to keep up with rising prices, since they’re linked to inflation gauges. One of the most popular is Schwab US TIPS ETF (SCHP), but there are also products from BlackRock, State Street and Pimco.
This article was provided by Bloomberg News.