Searching for a Safe Short Term High Yield Investment

Filed In Banking & Money ♦ Last Updated June 27, 2008

A couple years ago, online savings accounts were paying over 5% interest.  Now interest rates have dropped slightly and are just starting to recover.  I have short term money that I want to keep liquid, yet I also want a decent return on investment.  What do I do now?

In 2006 high interest online savings accounts were common.  Now you're lucky to get 3 percent. FDIC insured online savings accounts were an obvious choice then but now they're not looking so good.

My current short term portfolio consists of CD's and savings accounts.  HSBC Direct is paying 3.5% interest.  Some of the Wells Fargo CD's we have are paying around 2.5%.  My wife wanted those, I didn't.   At least the CD's pay more than Wells Fargo's ridiculous savings accounts with 0.10% interest rates.  That's ten percent of one percent interest.  So on $1000 you make $1 per year.  Like I said, ridiculous.

I looked into tax exempt bond funds. Vanguard has a few tax free bond funds.  Tax exempt bonds would provide a nice tax free stream of income.  However, as you can see on the Vanguard site, may of the returns have been negative for the year.  As Warren Buffet says, never lose money.

Considering these low rates, what can I do with short term money?  I define short term as money I want access to in the next several years.  Short term money should also be safe.  I have my long term money in the stock market.

I really don't want to lock my money up in CD's. Given the low rates right now, Certificates of Deposit aren't an appealing investment.  Traditional savings accounts are out, the rates are absurd.

It looks like my best option right now is the online savings account with HSBC.

Any other ideas I should consider?  If you have one leave a comment below.  I'm open to anything at this point.

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