Fixed Income Investments

Best Fixed Income Investments For A Low-Rate Environment

by Admin

Fixed-income investments are an important part of any portfolio. In a rising-rate environment, investing in fixed income can be an excellent way to earn a steady stream of income and hedge against inflation. However, in today’s low-rate environment, fixed income has become a less attractive option for investors looking for yield. With that said, there are still a few good options available for those seeking higher returns on their cash.

Bond funds

Bond funds are an excellent option for investors looking to diversify their portfolios. If you have a long time horizon and aren’t interested in the stock market, then bond funds can be ideal for your needs. Bond funds are low-risk investments with low returns and offer investors more stability than individual bonds do.

Certificates of Deposit

While CDs are not technically a bond, they are government-backed and have the same qualities as fixed-rate bonds—you can get a higher interest rate than other investments. The benefit of a CD is that it’s FDIC insured, which means your money is protected in case something happens to the bank.

However, there are some downsides to CDs: you cannot withdraw your money before its maturity date unless you pay an early withdrawal penalty (usually around 90 days’ worth of interest). You also cannot invest in more than one certificate at once; if you do, you will only earn interest on what was deposited into each individual certificate at the maturity date (not compounded interest).

Online Savings Accounts

Online savings accounts, while not a great return on investment, are FDIC-insured and you can manage them from anywhere. If you want to keep your money safe and accessible, but aren’t ready for the commitment of a CD or other fixed-income investment, an online savings account is a good option.

Money market accounts

Money market accounts are a good place to park short-term money and earn a guaranteed rate of return.

Money market accounts, or MMAs, are low-risk and safe investments. They don’t offer the same liquidity as most other types of investments, but they’re still a good place to park your funds if you need them in the near future—or if you want to earn some interest while waiting for better opportunities elsewhere.

Money market accounts

MMAs are FDIC-insured and insured by SIPC (Securities Investor Protection Corporation) up to $250k per account holder ($500k per married couple).

Unlike CDs, MMAs aren’t fixed—the interest rates may change over time depending on economic conditions and other factors like inflation or deflation. However, since these accounts offer higher interest rates than regular savings accounts do (typically 0% APY), they tend not to fluctuate too much from year to year anyways: The average annual percentage yield (APY) on an MMA was 0.16% in December 2018 according to Bankrate’s latest survey data; compare this with the average APY for all deposit products at 1%.


Annuities are a contract between you and an insurance company. They’re not FDIC-insured, so there’s no guarantee that your money will be safe from loss if the company goes belly up. And this is not just a theoretical risk: Several large companies have failed recently due to poor management or fraud.

Think about it: What would happen if you signed up for an annuity, put $100K in it and then discovered that some executive had embezzled all of the firm’s assets? Your investment is gone! As with any other type of investment—except maybe cash—you should only invest what you can afford to lose without causing yourself distress or financial hardship.

Some annuities do offer guarantees against losses due to market volatility, but these guarantees only protect against losses in value over time—not total loss like in the scenario above. If all goes well though, fixed-rate annuities can provide a reliable stream of income during retirement years when returns on investments tend to be low (or nonexistent).

Defined-Maturity Bond ETFs

If you’re looking for a way to get more flexibility with your fixed-income investments, you may want to consider ETFs. These instruments are similar to mutual funds in that they pool money from investors and invest it in a variety of assets under the direction of an investment manager. The main difference is that ETFs are traded like stocks on stock exchanges, whereas mutual funds can only be bought or sold at the end of each trading day (known as “net asset value”).

You’ll also find lower fees associated with ETFs—significant savings when you’re talking about low-rate environments where every basis point counts! And because they trade throughout the day, they offer greater liquidity than mutual funds; which means if/when interest rates rise again, you’ll have an easier time converting them back into cash now that interest rates are so low.

High-Yield Bond ETFs

High-Yield Bond ETFs

High-yield bonds are a way to invest in the high-yield bond market. They’re a good way to get diversification in your portfolio, and they can be used as a hedge against inflation. However, they’re not FDIC-insured.

Municipal Bonds

Municipal bonds are debt securities issued by local governments to fund projects that benefit the public good. The interest earned from municipal bonds is exempt from federal income tax and, in most cases, state and local income taxes as well.

Municipal bonds are considered a safe investment because they are backed by the full faith and credit of the municipalities issuing them. For example, if you buy a municipal bond issued by your state government, you know that those funds will be returned to you—even if things don’t go so well for your state in the near future (as happened in Puerto Rico).

The main drawback to municipal bonds is that their rates have historically been lower than other fixed-income securities like corporate and Treasury bonds. But as interest rates rise during this low-rate environment—and they eventually will—you may see higher yields on these securities!

Peer-to-peer lending platforms

Peer-to-peer lending platforms allow you to lend your money directly to individuals and businesses. In many cases, you can earn a higher rate of return on your investment than you would from conventional fixed-income investments such as certificates of deposit (CDs).

How it works: After signing up with the platform, borrowers will submit loan applications that are reviewed by an employee at the financial institution backing the startup. If they’re approved, investors will receive periodic payments based on how much risk they choose to take with their investment.

There are a few good options

Unfortunately, the answer to that question is “not many.”

There are plenty of strong fixed-income investments for a low-rate environment. The problem is that most of them aren’t available to the average investor. And even if you could buy some of them, it would be difficult to do so without incurring significant risk or losing out on potential returns.

But there are still options—options that have lower risks than most alternatives while still keeping your money safe and earning interest at above-average rates. Here are some of the best ones:

  • Peer-to-peer lending platforms: These let investors lend directly to small businesses and consumers through online platforms instead of going through banks or other financial institutions. Interest rates vary depending on which platform you use and what type of investment (loans or notes) you choose; Lending Club currently offers around 5% annual returns, while Prosper isn’t far behind with 4%. But keep in mind that these investments carry more risk than traditional bonds because if borrowers default, there’s no government insurance on top like there would be with Treasuries or corporate bonds—you’d need better credit scores than me!


It’s a good time to be in the market for fixed-income investments. In today’s low-rate environment, you should have no problem finding an investment that works for you and your needs. If you’re looking for a more hands-off approach, consider one of these online platforms or peer-to-peer lending services. Just make sure you do your research before choosing one!

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