While the FOMC is not finished with raising rates and the stock market has recovered some this quarter, many are still looking for safer options for short-term cash. Not all options are created equal, but I wanted to review four options for short-term high return investments, or high yield return. Some of these options can be good for a few months, and others, like the savings bond are flexible after 6 months, but work better in the (slightly) longer term.
We will cover:
HYSA
High yield savings accounts (HYSA) can help you grow your savings (and emergency funds) faster than a traditional savings account. I did a full breakdown of emergency funds already, but it’s important to recognize that HYSA can be a promising option right now for short-term cash as well. My favorite is the American Express Personal High Yield, which is currently a top earning with 3.5% annual interest. Discover Bank is also another great option with no minimum or fees. The national savings account rate is currently 0.33% (as of 1/17/23), so these HYSA options are more than 10x the average. Most accounts require a 7-day holding period. Some have minimum balances or fees upon withdrawal, so make sure you read the fine print. The best part of a HYSA is that they automatically adjust as the FOMC raises rates. So you are able to increase your earnings without changing your investment.
CDs
I’m sure Certificates of Deposit (CD) are the option most of you are familiar with the most. CD rates can change daily and are based on a specific amount of time. However, at purchase you are locking in one fixed interest rate, so it’s important to do your homework and select the highest one for the time period. If you don’t want to stress about the fluctuations of interest rates or the stock market, CDs are a great option to grow your money. Just remember, you have penalties for taking the funds out before their maturity date, so make sure you won’t need the money you choose to invest until after it rolls off. Capital One currently has an 11-month CD earning 5% APY with no minimums. If you look at the average 12-month CDs today (according to Bankrate.com) earning 2.89% APY, this CD becomes VERY attractive. You can select CDs for 6 months or 60 months.
I Bonds
When inflation hit a 42 year high last year, everyone started talking about Treasury I Savings Bonds. I did a full breakdown of I savings bonds in this post, so I won’t go into too much detail here. The annualized rate through April 30, 2023 is 6.89%. These aren’t technically set up for short-term investment as they are 30-year Treasury bonds. You can redeem them early, but there is a penalty before 5 years. Individuals are also limited to $10,000 in bonds, but the current annual return was worth including here for an investment option.
MMF
Money market funds (MMF), which are usually mutual funds in brokerage houses, are starting to earn very attractive rates. If you have cash sitting in an investment account as you wait to make your decisions or try to time the market (tip: never works), then be sure to get your cash working while it waits. Money market funds work like mutual funds so they have T+1 settlement. You will need to liquidate the MMF at the same time (or before) any stock purchases, but it will generate monthly interest while you wait. Most trade on 7-day yields, so pay attention to those yields, along with any minimums and expense ratios when you are choosing your MMF. Fidelity has a money market fund – SPRXX – with no minimum currently earning 4.14% yield. Schwab has their own fund – SVWXX – also with no minimum investment earning 4.47%. If you’re not investing with either of these brokerage houses, you can invest in a Vanguard or Invesco MMF, like VMFXX or INAXX. Remember to check minimums as each fund is different. Regardless, these are great options for your current investment accounts for any cash you have sitting, just waiting to be invested. If you are still looking for ways to be invested, check out my blog post about the 50/25/25 rule.
These four options can provide short-term high return for your current cash.
This is not an advertisement or solicitation for business, and my personal experience does not constitute universal application. Information is for informational and recreational purposes only. Each financial situation is unique, and you should do your own due diligence. Past performance does not guarantee future results. Some content may contain affiliate or referral links.
Jordan is the creator of Lifetime Tidbits and has spent more than 10 years working in finance, primarily as a securities trader. She holds her CFA charter and has been Series 7 & 63 licensed.
Amex and Discover now at 3.75% and should raise again soon!