What Are “Safe Money” Strategies?

What Are “Safe Money” Strategies?

April 10, 2023

Investment Re-Allocations Worth Exploring Amid Market Volatility

With inflation continuing to be an economic bugaboo and market volatility seeming to persist, at least in the short term (and for who knows how long), many investors are considering reallocating their investment portfolios to protect their wealth from threats and risk. We are recommending that many of our clients do the same.

What are often referred to as “safe money strategies” or “low-volatility investment vehicles” are portfolio strategies that reallocate “growth” investments to holdings that historically return lower yield, but that also present lower risk—and, in some cases—no risk at all.

This current environment does not appear to be a storm worth “weathering,” but rather a harbinger of things to come..and risk to be avoided, if possible.

Lower Volatility, Lower Yield

The following investment vehicles, what many would consider “safe money strategies,” range from no or little risk at the top—with lower yields, as well—to those with slightly higher risk, and slightly higher yields as we go down the list. In all cases, these should be considered alternative options to help protect money against inflationary forces and market volatility.

Cash, Money Market Accounts, and Savings - These accounts bear next to no risk. They are very liquid, and there are no penalties or negative ramifications for making withdrawals. But the interest yields are either 0 or very low.

High-Yield Savings Accounts - Some financial institutions, such as credit unions and Internet-only banks (like Goldman Sachs’ Marcus), will pay higher interest rates on their issued savings accounts, passing on the savings of bearing no physical infrastructure costs to their customers as a way to attract deposits.

Certificates of Deposits (CDs) - Perhaps not as much so as decades ago, but CDs do typically offer higher interest rates than standard savings accounts. However, they are not nearly as liquid, coming with penalties for withdrawing funds prior to the certificate’s maturity date. 

Government-Backed Bonds - Because these low-yield investment vehicles are backed by the federal government, they are generally considered the most “safe,” but they come with lower interest rates than other types of bonds, and certainly stocks. The options, again ordered from low risk and return to higher as we go, include:

  • Treasury Bills (T-bills): T-bills have the shortest maturities at four, eight, 13, 26 or 52 weeks, with the interest and principal paid at maturity.

  • Treasury Notes (T-notes): T-notes are issued in terms of two, three, five, seven or 10 years. They pay interest semi-annually, then the principal at maturity.

  • Treasury Bonds (T-bonds): T-bonds have longer maturities than either of the above, ranging from 20 to 30 years. Like T-notes, they pay interest semi-annually and the principal upon maturity.

  • Treasury Inflation-Protected Securities (TIPS): TIPS carry maturity terms of five, 10 or 30 years and pay interest semi-annually. These securities are indexed to the Consumer Price Index (CPI), meaning the principal value increases or decreases with inflation. While the interest rate itself is fixed, payments fluctuate based on the adjusted principal value. At maturity, investors receive the adjusted principal or original principal, whichever is greater.

  • Floating Rate Notes (FRNs): FRNs are issued for a two-year term and interest is paid quarterly—although payments vary based on a reference rate tied to the 13-week T-bill.

  • Separate Trading of Registered Interest and Principal of Securities (STRIPS): Treasury STRIPS, also known as zero-coupon treasuries, let investors hold and trade the interest and principal of certain T-notes and bonds as separate securities. They are not available directly from the government but can be bought and sold through a financial institution or brokerage firm. Payments are only made at maturity.

  • Purchasing Bonds on the Secondary Market – It is possible to buy a seven-year bond while it’s in its sixth year of maturity, say, from the current bond holder. This allows the buyer to assume control of the investment with just a year remaining and lock in some interest in the short term, while maintaining relative liquidity, given that the payment will be made in only 12 months.


Corporate Bonds - These bonds operate similar to government bonds, but they differ in the significant way of being backed by corporations, and not the federal government. As a result, they can be riskier among the “safe money strategies” you might consider, but they often yield higher returns than government-issued bonds. Note: there are many types of corporate bonds—Secured, Unsecured, Senior, Junior Bonds, Convertible, Guaranteed—and they are all different. They also each carry ratings from AAA on down, so the investor needs to do their homework about the type of bond, its issuer, and its rating. Any bond rated BBB and above is considered investment-grade, while those rated BB or below are considered high-yield but riskier.

Another category of investment vehicle that may be relevant to this discussion are Annuities. These are investment products backed by insurance companies, which many times offer guarantees on the contract, backed by the full faith of the company. So companies like Prudential, that have a long history and demonstrable track record in the Annuity space, are fairly sound low-volatility options. Annuities can either be fixed-term, meaning there is no fluctuation of interest rate for a specific duration of an investment term, or fixed-index, which are either structured so that they can not go down in value over the term or designed with growth strategies in place with higher upside, but still guaranteed against going down in value (though these types of Annuities generally have longer holding periods, during which you have restricted  access the funds).

Strategies for the Here and Now, and the There and Then

Regardless of short-term market volatility or temporary pressures on your investments, such as higher-than-historic monetary inflation, every investor  should have some portion of their portfolio in what would be considered “safe money” investments. How you allocate your portfolio should evolve over time, and be responsive to short-term influences, as is our current situation. 

In bull markets and in bear, if you have some portion of your savings in low-volatility vehicles, that creates consistency and some measure of predictability in your retirement planning. Then, the other portion of your portfolio should have some volatility built into it in order to realize gains. How much of your money belongs in each category will depend on what’s happening in the world, how close you are to retirement, and how much wealth you need to build to lead a comfortable lifestyle into your retirement years.

As an advisor, my approach is to personally assess each client’s unique situation and make recommendations based on that individual’s or family’s current goals, present station in life, and future plans and ambitions. If you’d like to discuss yours, simply contact us to start the conversation.