Are There Any Safe Havens Left For Your Money?

Investing
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By Joe Baker

Learn more about Joe on NerdWallet’s Ask an Advisor

This is probably the most frequently asked question that I hear when talking about investments.  It always goes something like this:

“Hey Joe, where’s a safe place to park my money and get a decent return without any risk?”

For the last 2 years, I’ve been answering with:

Dead Silence.

You see, normally, a safe haven would be a certificate of deposit (CD), a bank savings account, and US government bonds.

However, since interest rates are at rock-bottom lows, these safe havens offer very little return on your money.  For example, if you put $10,000 in a 1 year CD today, one year from now you’ll get back $10,000 plus $67. Woopeee!

I can even argue that the ultimate safe haven investment, U.S. government bonds, is probably the worst place to park your money right now, especially if they mature in 10 years or more.

The reason being is that when interest rates start to rise, and they have started already, the value of the bond drops and your investment loses value.

So, if there isn’t any place to put your money where you can get, say 3% annual return AND no risk, what are you supposed to do with it?

There’s really only one option: stocks.

There are some very low-risk, high-quality stocks out there that can give 3-4% a year in dividends plus the potential for capital appreciation if the stock price rises.  Of course, the stock price could drop.  This just means that you’ll have to shoulder some risk in order to get any kind of decent return on your money.

This is the way it will be until interest rates rise high enough (say a 1 year CD yielding 3%) where it will make sense to get back into the traditional safe havens.  Don’t hold your breath.