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6 Investment Options for Uncertain Times

Written by
Samantha Rose
Samantha Rose is a personal finance writer covering financial literacy for OppU. Her work focuses on providing hands-on resources for high school and college-age students in addition to their parents and educators.
Read time: 6 min
Updated on July 31, 2023
man in contemplative pose reading 6 investment options for uncertain times on his laptop
You know what they say: What goes up... 

Investing is a gamble. Even when the stock market is soaring, there’s always a chance it might tank.

One way to weather a downward swing is by using investment types that typically carry less risk. Lower risk investment options usually aren’t hit as hard when the market takes a turn. The trade-off is they don’t pay as well when the market is performing — but hey, a small return (or small loss) is way better than a big loss.   

Looking to hedge your bets? Here are six lower-risk investment types — plus some personal favorites from the pros.

No. 1: Savings account

  • Average rate: 0.09% APY

A savings account isn’t considered an investment, but you will see minimal growth on your deposit thanks to the magic of compound interest. 

What’s compound interest? It’s interest you earn on a principal sum of money, which includes any previous interest you’ve already earned. In other words, interest on interest. In fact, this is why money in a savings account can only increase (as long as you aren’t withdrawing from it).

A savings account is a great option for an emergency fund — it’ll grow, without the possibility of being stolen or destroyed, which is a risk that exists with cash. If the financial institution goes under, the account is likely government-insured, meaning you’ll be reimbursed your funds.

Choose a savings account with a high yield (meaning a higher return or more money in exchange for your investment) by shopping around financial institutions and comparing rates.

No. 2: Savings bond

  • Fixed rate: 0.10% APY for Series EE savings bonds
  • Fixed rate: 0.20% APY for Series I savings bonds
  • Inflation rate: 2.02% APY for Series I savings bonds

Like savings accounts, savings bonds can’t be classified as a traditional investment. They have minimal risk, but also minimal returns. 

The U.S. Department of the Treasury sells two types of savings bonds, the EE bond and the I bond: 

EE Bond

The EE bond is the most common type of savings bond, and is available for purchase at a discounted rate. These types of bonds accrue interest on a fixed rate and mature after a set amount of time, typically 30 years, but reach face value after 20 years.

I Bond

An I bond doesn’t have a guarantee of value once it reaches maturity. The main benefit of the I bond, however, is that it includes both a fixed rate and an adjustable inflation rate to accommodate for rising inflation costs, which can impact the value of the bond.

No. 3: Certificates of deposit

  • Average rate: 0.10% APY for 1 month CD
  • Average rate: 0.19% APY for 3 month CD
  • Average rate: 0.35% APY for 6 month CD
  • Average rate: 0.49% APY for 12 month CD

Bank certificates of deposit, or CDs, are federally-insured savings accounts. They are different from a traditional savings account, however, because a CD pays a fixed interest over a set term. 

There is one main drawback of a CD: If the money is withdrawn before the maturity date, the bank will hit the investor with a penalty fee. Make sure you don’t need this money until its maturity date, which ranges from a few months to a few years after your initial deposit.

These low-risk options can grow your funds faster than a savings account. Before choosing a CD, look for high-yield accounts by shopping around, but be prepared to have a large initial deposit ready.

No. 4: Money market fund

  • Average rate: 0.15% APY

A money market fund is a type of mutual fund, or a financial product that is a pool of money from several investors. This collective fund is then invested in stocks, bonds, money markets, and other assets. 

By opting for a short-term money market fund, an investor can diversify their investment portfolio while parking their cash for a future investment. Be wary of high-risk money market fund holdings, as they can lose value depending on a volatile stock market. 

A money market fund is often preferable to a CD because it is a liquid asset than can be readily converted to cash and withdrawn without penalty.

No. 5: Treasury bills, notes, and bonds

  • Average rate: 1.98% APY for Treasury bills
  • Average rate: 2.16% APY for Treasury notes
  • Average rate: 3.88% APY for Treasury bonds

The U.S. Treasury Department sells treasury bills, notes, and bonds, which are fixed-income investments, making them the safest investments in the world. Unfortunately, the low risk also means they have some of the lowest interest rates. 

The main difference between bills, notes, and bonds is maturity date and interest.

  • Treasury bonds take the longest to mature at 30 years. 
  • Treasury notes vary in terms from two to 10 years.
  • Treasury bills have set maturity dates ranging from a few days to one year.

There’s little to no risk of losing money with these financial options, so long as an investor doesn’t withdraw early. Upon maturity, these investments will return their face value.

Investors typically use these types of government-issued fixed-income investments as a means to save for educational purposes or retirement.

No. 6: Corporate bond

  • Average rate: 3.14% APY for seven- to 10-year high-quality bonds

A corporate bond is issued by a corporation, often to help the business expand. These bonds range from low to high quality and offer attractive yields.

Corporate bonds are affected by both the likelihood the issuer defaulting and the risk that the value of the bond will decrease or fluctuate as interest rates change. Although default risk is limited among higher-quality bonds, it is still a possibility, so it’s crucial for investors to carefully select a bond issuer, avoiding lower-rated ones.

There are two factors to remember concerning interest rate: 

  1. Bonds that mature quickly have a lower interest-rate risk. 
  2. Long-term corporate bonds are more sensitive to changes in interest rate, but also tend to have larger returns.

Avoid junk bonds, or the lowest-rated, riskiest type of corporate bond. Instead, choose a high-quality bond from a reputable large company, even if that requires a bigger investment. Chances are it will pay off in the long run.

Favorites from the pros

Michael Towle, president and founder at Navigator Wealth Management

Beyond the usual suspects of cash, CDs, and money markets, the next step that can really make sense for someone who wants to protect their principal, but get something better than the bank rate, is to look at short-term, high-quality corporate bond funds. 

Most mutual fund companies have a fund that fits into this sleeve. Be careful: A lot of mutual fund managers will juice the income by owning a bunch of suspect high-yield energy or financial bonds. 

There are plenty of high-quality, short-term corporate funds that should yield somewhere between 2% and 3.5% without a lot of price movement and [with] performance histories that are worth looking at.

Gaurav Sharma, founder of BankersByDay

When it’s time to invest my own money, I always pick the [blue-chip stocks]. The return is not stellar, but that is compensated by the reduction in volatility and risk. 

If you want higher returns, just put about 10% of your capital in some other high-risk/high-reward securities. 

I am also beginning to gravitate towards high-dividend paying stocks because cash flow is king. These stocks are termed “Dividend Aristocrats” and “Dividend Kings” and [are] a good way to balance your portfolio, which is almost always heavily biased towards just growth stocks or real estate.

Bottom Line

The market is a gamble, but lower-risk options can help protect against potential losses. If you’re looking to hedge your bets, find a balance of risk and reward that’s right for you.  


Article contributors

Gaurav Sharma is an ex-banker and founder of BankersByDay, which aims to help students and young professionals break into the world of banking and finance. Sharma currently works as an independent product structuring consultant for fintech startups, small banks, and asset management firms. He is a certified financial risk manager.

Michael H. Towle, CRPC, is founder and president of Navigator Wealth Management, a boutique firm created out of the burning desire to deliver actionable, realistic financial planning and wealth management to a select group of families as a true fiduciary. Towle holds a bachelor’s degree in business/finance from Point Loma Nazarene University and carries a certified retirement planning counselor designation from the College of Financial Planning.

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