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8 Safe Places to Keep Your Money

With the stock market acting up again, and some concerned about the fact that the economic recovery is moving at a snail’s pace (or even possibly moving toward a double dip recession), looking for safe places to put your money is becoming important. You may not be overly concerned with huge returns right now; safety has become vitally important. If you are looking for some fairly low risk things to do with your money, here are 8 safe places to consider putting your money:

1. Bonds

One of the safest places to park your money is in bonds. Bonds are basically loans you make to different organizations. While there was some shake-up in the corporate bond market a couple of years ago, after the financial crisis, some companies are back on their feet, and you can get relatively safe bonds. Municipal bonds also carry fairly low risk, along with some special tax advantages. And, of course, the safest bonds are U.S. Treasury bonds.

You should realize, though, that bonds are not completely safe. There is still the risk of default, and if you get bonds from organizations with lower ratings, the risk of default increases.

2. Bond ETFs

If you are looking for something with a little more diversity, and the possibility of slightly higher returns, you can consider bond ETFs. Exchange traded funds are collections of investments that are traded on the stock market like a regular stock. You can invest in a diversity of bonds, taking advantage of their relative safety. You should realize, though, that bond ETFs come with their own risks, and they are not insured. You can get Treasury ETFs, as well as invest in muni ETFs and even foreign bond ETFs. Be aware of the risks, but also realize that bond ETFs are reasonably stable, and can provide a viable place for your money.

3. TIPS and I-Bonds

If you want the safety of Treasury bonds, and you want to keep pace with inflation, TIPS and I-Bonds are good choices. These bonds are backed by the U.S. government – which is backed by U.S. taxpayers, widely considered the most stable taxpayers in the world. TIPS and I-Bonds are adjusted for inflation, so your purchasing power is preserved, along with your capital.

4. High Yield Bank Accounts

There are a number of high yield bank account options these days. This includes high yield savings accounts, rewards checking accounts and money market bank accounts. Despite the name “high yield”, though, it is important to realize that yields may not be that high. The term “high yield” is only in comparison to yields on more traditional accounts. However, if you are going for safety, an FDIC insured financial institution can help you keep your capital safe and sound, guaranteeing that you will get it back, even if your bank folds.

5. Certificates of Deposit

Another thing you can do is to put your money into CDs. Certificates of Deposits are protected by FDIC insurance, so you know that your money is guaranteed. If you are willing to commit to a longer CD term, you can also reap larger yields, in addition to keeping your money save.

However, a longer term often comes with the risk that yields will rise, and you will be unable to take advantage of them. In order to mitigate this problem, consider creating a CD ladder. That way you will have the option of periodically taking advantage of possibly higher rates, while your money grows (slowly) in safety.

6. Money Market Mutual Funds

These are different from money market bank accounts. First of all, your bank account is usually FDIC insured, so you are protected against loss. A money market mutual fund, though, offers you the chance to enjoy capital preservation while earning a return. A money market mutual fund offers the opportunity to invest in a variety of cash assets, and so is relatively safe. However, it is important to realize that there is a chance that you could lose money in this type of investment. Your returns will be rather low, though, because of the low risk nature of cash products.

7. Pay Down Debt

Another thing you can do with your money is to advance your future by paying down debt. Most of these safe products and investments offer rather low rates of return. Whenever anything offers low risk, it is likely to have a low rate of return. This is because potential earnings are related to your risk of loss. As a result, you might find that safe places to put your money will not offer a great deal of return. If you have high interest debt, you might actually be ahead to aggressively pay it down, instead of putting that money in a CD or money market account.

Make sure you have some emergency savings set aside in some sort of high yield cash account, and then go to work on your debt. It is a safe place to put your money, since you are contributing to a more stable financial situation for yourself. It may be somewhat disappointing to put that cash toward debt, but you will feel better when you have paid down some of your high interest obligations. Indeed, the money you save in interest charges will likely outweigh the meager returns you could get from a safe investment.

8. Prepare for the Future

Another unconventional (but safe) place to put your money is in supplies and emergency preparedness. If you have some money to spare, you might consider buying items that can be used as long term food storage, or get some emergency supplies. That way, if a financial crisis strikes your family, or a natural disaster comes into play, you will be ready. You will not have to spend as much money on supplies, and you will have some of what you need. Proper preparation for the unexpected can be considered a safe investment in your own future – even if you do not see monetary returns.

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  |     |   Comment #2
From number 7...

"If you have high interest debt, you might actually be ahead to aggressively pay it down, instead of putting that money in a CD or money market account."

Ya think??  What an understatement.  After developing an emergency fund it is simply ridiculous to do anything but pay down that high interest debt.  That's pretty much always the case, but especially now.
George Brown
  |     |   Comment #3
Excellent rundown.  #8 is perhaps one of the most important, particulary since we really don't know where we're headed.  As the Fed chairman said, this is period of unusual uncertainty.  In my view he really understated things.  But, he's very correct.  In my 73 years I've never seen anything like this.  Even the depression that the left winging Roosevelt inherited pales.  Why?  We had money, we didn't owe the rest of the world as we do now.  We weren't bankrupt as we are now. 
  |     |   Comment #4

Bonds are not a safe place to put money.  They go up and down in value!

Four and 5 are the same thing:  an FDIC insured bank.

If there's something that we should have learned from the recent economic situation is that money market funds are not a safe place to put money.

You don't keep money when you pay debt;  you send it to your lender.

Finally, you don't save money by spending money.
  |     |   Comment #31
I have to say you are wrong about paying high interest debt. over time you save a lot of money by paying off high interest debt...... I am about to pay off a loan that is 9% interest I am going to save over 200.00 dollars a month.  So you are wrong on that one.
  |     |   Comment #6
Volumes upon volumes of "I'm Smarter than Thee" books have been written on this issue. I'm confident in only one thing: I am confident I can add little or nothing to the discussion.

That having been disclaimed, might I suggest a tried-and-tested formula advocated by Jack Bogle (and others), namely an asset allocation based on your age. It's over-simplified, I know, but it does give you a starting point.

Take your age. Make your asset allocation in bonds and cash equal to your age. The balance should be in equities or other risk-prone investments (real estate?). Disregard the equity in your primary residence, calculate your denominator by figuring in only "investable" assets, i.e., stuff you can buy or sell as needed.

Remember that CDs are nominal bonds, just like T-Bills, I-Bonds, and the like. They count toward your "bonds and cash" asset allocation.

This is my observation: Anchor your bond/cash portfolio allocation with 2/3 in CDs (laddered long) and 1/3 in a moderate-duration bond fund (the bond component of any reasonable index fund will do this, e.g., Fidelity or Vanguard). 

Then, sleep well. You prolly won't make a ton of money when the bull snorts, but you also won't see your retirement account crater as some have the last couple of years.

For most folks, throwing new money at individual bonds or bond funds these days is a fool's game. When interest rates go up (as they must and will), you will get hammered. Build a nice, conservative ladder of CDs to anchor what bond funds you have. With so much money flowing into bonds and bond funds these days, don't be afraid to take a contrarian position and invest in equities, especially if your asset allocation is above your "age" in cash, CDs and bonds.

Assuming you have a handle on debt, harvest your fixed-income assets in reverse-yield order, cashing out those horrid one-year T-Bills first, while hanging onto those bond funds or CDs paying a bit (maybe more than a bit) more.

Just my $.02.

  |     |   Comment #7
forever stamps?
  |     |   Comment #10
#7 "After developing an emergency fund it is simply ridiculous to do anything but pay down that high interest debt."

Is 4.875% a high interest debt with debt amount of $130k and still 10 years to go on a mortgage? 
  |     |   Comment #9
I strongly disagree with the author that bond funds (ETFs or mutual funds) are a safe place to put your money. I find this statement to be downright dangerous.

Bonds and bond funds are investments -- not deposit accounts. Buying individual bonds of high quality is fairly safe because if you hold them to maturity you're unlikely to lose your principle.

But with bond funds it's easy to lose principal -- especially now since they've done so well recently and could be due for a correction. Many investment professionals believe that bond funds are currently in a bubble -- and we all know what happens to bubbles. They advise against putting new money into bond funds at this time.

If you already own bond ETFs, the pros advise protecting your principle and profits by setting tight stop loss orders.
  |     |   Comment #12
A wise man said, "be greedy when others are fearful" and that man is the richest man in the world today. So RUN away everyone. Hide your money from the market and let inflation eat away your precious 1% savings account divedends. I'm praying for a double dip, because i go "all in"   
  |     |   Comment #14
I don't want to see a "double dip", but I am prepared for a "double dip" as best I can and still feel some what comfortable with low interest paying CDs.  I would never pray for a "double dip".  More jobs and homes will be lost and too many unfortunate people will be hurt.  Greed at the expense of someone else is the worst kind.
  |     |   Comment #18

You need to clarify what you're saying.

First you say put 1/3 of your portfolio into bond funds.

Then you say bond funds are a fool's game and will get hammered.

  |     |   Comment #19
I hope Miranda is hot, because her posts here are not.  As far as I can tell, she is a fount of false information and misguided advice.
  |     |   Comment #22
Find high rated safe Banks invest in CD's, low interest, consider them as a storing place for your dollars until conditions improve in 2 to 3 years. Also consider the Fed.,stay in cash. 
  |     |   Comment #24
Try a mutual fund like Permanent portfolio (PRPFX) It is divided equally: 25% Cash 25% gold bullion 25% bonds 25% stocks. Chances are at leasr one bucket will be performing well. In good times and bad.
  |     |   Comment #27
Matress, insured by colt or smith & wesson, could us old folks safest bet to keep their savings for their future. Return of investment vs return on investment is better than losing it when the market drops off the cliff again.
  |     |   Comment #29
The market can and will fall again as long as greedy people are running it. The stock market crash of 08 was because of greedy people. The real greedy ones got out the day before because they saw it coming.
  |     |   Comment #30
"The real greedy ones got out the day before...."  You got to be kidding!  Is proper financial planning being "greedy?"   The market is geared toward the financial institutions, issuers, etc. and the public is sought b/c of fees, rates, etc.  Some of us were out of the market b/c we had saved what was/is needed in "retirement" and don't need to think about much of a financial nature except, "can I get a better CD interest rate" somewhere which is where DA is great and focused!  Thanks, Ken! 
  |     |   Comment #33
what is a DA?
  |     |   Comment #34
You're kidding, of course?
  |     |   Comment #40
Anonymous, your comment #30 is right on the mark.

It has been quite obvious for sometime, a few people have lost sight of what depositaccounts.com was originally focused on.
  |     |   Comment #32
I don't blame them for getting out. 
Jakk Kal
  |     |   Comment #43
Saw it coming were warned it was coming. That is what happens why one is 1% they can insider trade without consequence. Please do not use Martha Stewart as an example of this is not true. She doesn't come close to 1% richest then or now.
  |     |   Comment #39
But putting money into food and supplies does provide a nice return since inflation and price increases will cause these items to be bought with future dollars. Not to mention devaluation of the dollar.
dollar bill
  |     |   Comment #42
the banks are not safe because of the bail ins .. rules and regs can be changed.
  |     |   Comment #44
Govt must protect the investments in banks as govt gets tax
  |     |   Comment #45
Live every day as if it were your last! Why bother saving thousands upon thousands of dollars for a future that may never come?
Don Brooks
  |     |   Comment #46
How about hundreds upon hundreds?

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