5 Best Fixed Rate Investments
Looking for the 5 best fixed rate investments? Knowing about the best fixed rate investments will keep your money safe while earning a nice amount of interest. The best fixed rate investments are always bonds. Bonds loan money to government entities or corporations and remain the best investment for risk-averse investors. Here are the 5 best fixed rate investments.
- Municipal bonds. Municipal bonds are bonds that pay a fixed yield every six months and are loan obligations for local and state governments. These bonds earn tax-free income, which is ideal for high income earners. AAA general obligation bonds are safest.
- Zero coupon bonds. Zero coupon bonds do not offer interest payments. Instead, they offer a huge discount off the face value of the bond. When the bond matures, the face value is paid. These make a solid fixed rate investment.
- Treasury bonds. Treasury bonds are the safest investment available. The United States government backs these bonds, and like municipal bonds they offer fixed interest rate, tax-free payments for the life of the bond. These bonds also set interest rates in the U.S. market.
- Corporate bonds. Unlike government bonds, corporate bonds offer a higher yield, but earnings are taxable. Corporate bonds fall into two categories: investment grade and junk bond status. The credit worthiness of the issuing firm determines whether it issues an investment grade or junk bond. While junk bonds offer the highest yields among corporate bonds, they are also the riskiest because these companies lack credit worthiness. So, be careful with junk bonds.
- Series E bonds. Series E bonds offer a 50% discount rate off the face value as well as a fixed interest rate for the term of the bond. The government restricts yearly purchases to $5,000 a year, enough for one $10,000 bond.
Bonds provide a fixed rate yield for the life of the bond and provide some predictability in an uncertain market. Stick with bond investments and you will be able to sleep at night.