The Federal Reserve’s rate hike may be wreaking havoc on investors’ stock portfolios, but it’s suddenly giving them plenty of safe, high-yield options. For example, the yield on the risk-free 2-year US Treasury note hit 3.99% on Tuesday, its highest since 2007 and a good return compared to what stocks are offering investors. these days. Interest rates on all fixed-income product categories are rising as a result of the Fed’s actions, giving equity investors plenty of stable alternatives today. “We are certainly in a very uncertain time and the high inflation that we are seeing is what most investors are doing,” said Geetu Sharma, founder and chief investment officer of AlphasFuture in Minneapolis. has been unresolved for decades. “So a lot of the traditional approaches to investing are being questioned.” The Fed is expected to raise interest rates by 0.75 percentage points for the third time in a row on Wednesday. The threat of higher interest rates has weighed on equities this year – the S&P 500 has fallen 19% year-over-year – but should continue to boost these other assets. This is where investors can find profit and relative safety in volatile markets. Short-term US Treasuries US Treasuries are often a hedge against stock market volatility, but longer-term ones are taking a hit as interest rates rise. However, those at the bottom of the curve are insensitive to rate hikes and may make more sense for investors looking for safety and yields, especially if they are held to maturity. . “What really works right now is reducing the duration,” says Sharma. For example, the yield on the 2-year US Treasuries was higher than the 10-year yield, briefly reaching 3,604%, the highest level since April 2011. That means investors are buying. Bonds with shorter maturities will receive more money. in a smaller amount of time. Other short-term bonds now have higher yields for investors. The interest rate on the 3-month bill is 3.3%, while the 6-month term is about 3.9%. One-year bonds yield about 4%. I-bonds Series I savings bonds have been popular bets by investors this year because they’re surging with inflation and carry very little risk. Bonds of this type purchased through the end of October will have a record high annual interest rate of 9.62%. This is the highest annual interest rate that Bonds I have had since the U.S. Treasury Department began issuing them in 1998. They are also subject to near-zero risk because bond y does not depreciate when kept for a certain period of time. On the other hand, there is a slight penalty if you withdraw money from an I bond early, and there is a limit to how much you can put into the bond. Annuities Annuities protect against stock market volatility and ensure stable returns that have skyrocketed this year. Sales rose 22% to a record $77.5 billion in the second quarter of 2022, according to preliminary Limra data. The most popular types of fixed income annuities today, guarantee the buyer a certain rate of return over a fixed time frame. For example, the Midland National Life Oak Advantage 3-year annuity currently offers a rate of 4.40%. The same product in 5 and 7 year repetitions had rates of 4.70% and 4.85%, respectively. Of course, investors should carefully check the fees before purchasing an annuity. Sometimes such products come with a high cost that is profitable. CDs and high yield savings accounts Certificates of deposit and high yield savings accounts are two other alternatives for risk-averse investors who want to protect their money and enjoy modest growth. CDs will be suitable for investors who don’t mind locking up their money for the life of the asset. In general, you should use a shorter time frame to ensure that you don’t keep your money outside of higher yielding assets for too long. Currently, the top-rated six-month CDs offer returns between 1.8% and 2.5%, according to Bankrate. One-year CDs have rates ranging from 2.75% to 3%. High-yield savings accounts will generally have the lowest rates of return but will benefit when the Fed raises the benchmark interest rate. Currently, the top high-yield savings accounts have returns of around 2.5%, according to Bankrate. They also have the lowest risk as you can access your funds at any time.