Not to fearmonger. But, the U.S. could be headed for a recession in 2023 due to high inflation and an increase in interest rates by the Federal Reserve. Thankfully, by having some less-risky assets in your portfolio, you can help weather market volatility.
While lower risk exposure reduces investment returns over time, the tradeoff is lower returns. If you're aiming to preserve capital and generate regular interest income, that might be fine.
However, what if your goal is long-term growth? Should you consider investment strategies that match those goals? Then you're in luck. Stocks, for instance, can have segments (such as dividend stocks) that provide high long-term returns while reducing relative risk.
To begin with, we need to cover the safest option first; high-yield savings accounts.
As you may already know, a high-yield savings account is an insured savings account under the federal government. There is a higher interest rate on these accounts than the national average — which makes them appealing to many people.
Most of these accounts earn between 0.40% and 0.50% annual percentage yield. The annual percentage yield paid by some banks is between and based on aggregate account balances. In comparison, Bankrate's June 7 survey of institutions shows an average yield of 0.25 percent APY for savings accounts.
A high-yield savings account doesn't offer all that much excitement, but it does offer a significant rate. On top of that, you won't need to put in any extra effort to increase your balance Besides, you can easily open an account online with Chime, Marcus, Alliant, Discover, or Varo.
As an example, let's say you are able to open an account at 0.50% APY. With $10,000 in your account, you can earn around $50 per year. Even if you don't make billions with this account, it's much better than the five dollars you'd make with a 0.25% APY
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