10 Safe Investments That Aren’t Bonds

As an investor, you may have built a sizeable nest egg that needs protecting from the volatility of the markets. Facing potential interest rate hikes, bonds are being viewed with more skepticism than ever before. You might be on the lookout for investments that offer predictable returns and a level of peace of mind.

While there’s nothing exciting about these options, it’s important to remember: if you truly don’t want your nest egg to decline, there are worse things than parking your money in a bank. With interest rates near historic lows, you won’t be getting much of a return, but inflation is also relatively low at the moment, so cash isn’t really losing value either.

With that in mind, here are ten alternatives to bonds for those seeking stable returns:

1. Cash

Consider placing your money into high-yield savings accounts or even money market funds if you’re looking for a super-safe option. While the interest rates may not be anything to write home about, it’s still better than leaving your cash under a mattress.

Certificates of Deposit (CDs) offer slightly higher returns than a standard savings account but require you to keep your money in the bank for a set period. Some CDs allow for early withdrawal without a penalty, which makes them a viable option for investors who need some access to their funds. Beware, most CDs are backed by the bank, which is simply collecting the carry (interest difference) from US Treasury Bills and Notes vs the CDs they offer. You are investing in Government Bonds indirectly if you are placing money in a CD.

2. REIT Stocks (Real Estate Investment Trusts)

REIT stocks can be a stable addition to an investment portfolio because they’re known for offering high dividends. As an individual investor, you can use them to have a piece of the real estate market without buying property outright.

A unique aspect of REITs is that they are required by law to pay out all taxable income in the form of dividends. This makes them attractive for income investors. However, it’s important not to place all your eggs in one basket; diversifying your portfolio is crucial for protection against a crash in the real estate sector (as we saw in 2008).

It’s also worth noting that REIT dividends are classified as ordinary income by the IRS.

3. Lending Club

Lending Club has become an increasingly popular investment vehicle, allowing individuals to invest in others’ debt. You can build a portfolio of loans based on your risk tolerance and have a good chance of making money because Lending Club only approves loan applications from borrowers with solid credit. In fact, they claim that 99% of account holders with more than 100 notes earn positive returns.

If you’d like to learn more about investing in Lending Club, check out this article: Everything You Need to Know About Investing with Lending Club.

4. Utilities

Investing in utilities such as your local electric company can be a relatively safe bet. As a necessity for every home and business, utility companies have a stable cash flow that translates into reliable dividend payments.

5. Annuities

Annuities are contracts between you and an insurance company that provide guaranteed income at predetermined intervals or as a lump sum when you reach a specific age. They can be a good option for investors looking to secure their financial future in retirement, but do your research carefully before committing to any one plan.

6. Preferred Stock

Preferred stock offers the best of both worlds by providing a fixed income like bonds while retaining some equity-like characteristics. Preferred stocks often pay a set dividend, making them a potentially more reliable option for investors looking for consistent cash flow. They also have priority over common shareholders if a company goes bankrupt.

7. Consumer Goods Stocks

People aren’t going to stop buying essential goods such as food and personal care items no matter what the economy looks like, making consumer staples a relatively safe investment option in times of uncertainty. The iShares U.S. Consumer Goods Sector Index Fund (IYK) is one way to gain broad exposure to this sector.

8. Health Care and Pharmaceuticals Stocks

Health care, and especially pharmaceuticals, have become a reliable mainstay in the stock market, offering consistent returns. The Vanguard Health Care Fund (VGHCX), for example, has generated an impressive 13% return over the last decade and nearly 30% over the last year. Companies like Johnson & Johnson and Pfizer are two examples of reliable performers within this sector.

9. The Broader Stock Market

The S&P 500 is a benchmark that represents 500 of the largest companies in the United States, which have a proven record of growth over time. It’s worth mentioning that conventional wisdom would suggest avoiding equities if your goal is to protect assets. However, investing in an index fund or ETF like the iShares Total Market ETF (IWM) may not be considered as risky as owning individual stocks.

Investment options other than bonds can help provide stability and security when seeking a more conservative approach to growing your nest egg. Ultimately, it’s up to you to determine which of these alternatives align with your personal risk tolerance and financial goals. Diversification across several investment types is the key to weathering any market downturns that may come your way.

10. Precious Metals

Precious metals such as copper, silver, and gold are not simply a store of wealth, but are also important industrial and commercial needed resources. They will always have value, and have had an outstanding track record for thousands of years. Investing and purchasing such metals at low prices can help save guard your investments against currency risk.